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Advice, Tax, Uncategorized

Update on Verification of Suppliers’ GST/HST Numbers for ITC Claims

Section 169(4) of the Excise Tax Act requires a purchaser to substantiate its input tax credit (ITC) claim by obtaining information from the supplier, including the name of the supplier and the GST/HST registration number assigned to it. This information is typically obtained from the invoice provided by the supplier.

Beware: Invalid information such as a supplier providing a valid GST/HST number that belongs to someone else may result in the ITC being denied to the purchaser.

For example, in Comtronic Computer Inc. vs. The Queen, the tax court agreed with CRA to deny the ITC claim in the amount of $500,000 made by Comtronic on the basis that Comtronic did not take reasonable measures to determine the validity of the GST/HST number provided by a supplier. The Tax Court began its analysis by noting the statutory requirement for purchasers to obtain valid GST/HST numbers assigned to suppliers when supporting their ITC claim. The Tax Court did note this approach could result in unfairness to the purchaser that paid the GST/HST in good faith. However, it stressed that this mandatory requirement must be strictly enforced. In this case, the GST registration number provided by the supplier was, in fact, valid but belonged to someone else.

Through this case, the Tax Court has once again confirmed that purchasers will bear the risk and will be denied the ITCs if they fail to obtain valid GST/HST numbers assigned to their suppliers.

Based on the above, a purchaser should not assume that the GST/HST registration numbers provided by their suppliers are valid and should take measures to confirm those numbers even when there is no reason to suspect otherwise.

GST/HST registration number can be validated on the CRA website online services for businesses GST/HST Registry: GST-HST verification. For example, a supplier may inadvertently provide the registration number of a related entity.

In validating a GST/HST number on the CRA Registry, the proper legal name of the supplier must accurately entered. Similarly, QST registration numbers can be validated on the Revenue Quebec website: QST verification

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