26 March 2001 GST/HST Interpretation 34538 - Refunds of GST and Interest

Dear XXXXX:

Further to my letter to XXXXX dated September 12, 2000, and our meeting of February 2, 2001, I provide the following summary of the scenario discussed along with clarification regarding the registrants' entitlement to a rebate.

The scenario involves the refund of duties and interest pursuant to a re-determination of the value for duty of imported goods by the Deputy Minister or Commissioner. A GST/HST registered company (CANCO) imported goods and paid the applicable duties and taxes on the value for duty of the imported goods. The Canada Customs and Revenue Agency (CCRA) re-appraised the value for duty of the imported goods and assessed CANCO additional duties, GST, and interest on the increased value for duty. CANCO appealed the re-appraisal to the Canadian International Trade Tribunal (CITT) and received a favourable decision. The CCRA subsequently provided a refund of the duties (excluding GST) and the interest on the duties to CANCO pursuant to paragraph 64(d) of the 1997 Customs Act and 61(1)(a) of the amended Customs Act.

Where a refund of excess duties and interest has been authorized by virtue of a re-determination of the value for duty of an import under either of these provisions of the Customs Act, subsection 216(6) of the Excise Tax Act provides for a rebate of the excess of the Division III GST collected over that which is required to be paid. Subsection 216(6) of the Excise Tax Act provides that a rebate be paid pursuant to the provisions of the Customs Act that relate to the payment of such refunds and interest on the refunds as if the rebate of the excess tax were a refund of duty. Subsection 216(6) of the Excise Tax Act is subject to section 263 of that Act, meaning the rebate may only be paid in circumstances where the amount has not been previously rebated, refunded or remitted to the person, and the person is not entitled and has not claimed an input tax credit (ITC) in respect of the amount.

Considering the fact that CANCO is registered for GST/HST purposes and the importation appears to have been for use in commercial activities, it is likely that CANCO claimed an ITC in respect of the additional GST assessed on the re-appraised value. If CANCO is entitled to or has claimed an ITC in respect of the additional GST assessed, they are not entitled to a rebate of the GST by virtue of section 263 of the Act. Where CANCO is not entitled to an ITC and has not claimed an ITC in respect of the assessment and this can be verified by the CCRA, the rebate provisions in subsection 216(6) of the Act provide for a rebate of the additional GST assessed.

With respect to the interest assessed and collected on the additional GST on the increased value for duty, there is no relevant relieving provision in the Excise Tax Act. It is our understanding that there are relevant relieving provisions available in the Customs Act.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8812.

Yours truly,

Jeffrey Frobel
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate