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A pdf version of the article is available: GST/HST Reporting Changes

[Originally posted - February 2010]

CRA and the governments of Ontario and B.C. have recently announced proposed changes with respect to reporting and filing requirements for GST/HST returns.

GST – Mandatory Electronic Filing

CRA has announced changes in the reporting requirements for GST/HST registrants with a “threshold amount” (generally, annual taxable and zero-rated sales in Canada) greater than $1.5 million. For reporting periods ending on or after July 1, 2010, registrants will be required to file GST/HST returns electronically. There will be four filing options available:

• GST/HST NETFILE
• GST/HST Electronic Data Interchange
• GST/HST TELEFILE
• GST/HST Internet File Transfer

However, only the GST/HST NETFILE option will be available to the following registrants:

• Registrants required to recapture input tax credits (ITC’s) for the provincial portion of the HST
• Builders reporting transitional housing information (e.g., transitional new housing rebates); and
• Builders making sales of certain grandfathered homes (for purchasers not entitled to a rebate or if the builder has purchased a grandfathered home that will be subject to HST)

Under the new filing requirements, penalties may apply if a return that is required to be filed electronically is paper-filed.

Ontario and BC HST – Recaptured Input Tax Credits

Businesses with annual taxable sales in excess of $10 million and certain financial institutions will not be entitled to claim ITC’s on the provincial portion of HST in respect of certain supplies for the first five years following implementation (after which a three year phase-in occurs). The restricted supplies are:

• Telecommunication services (other than internet access and toll-free numbers)
• Food, beverages and entertainment
• Road vehicles weighing less than 3,000 kg (including parts and certain services); and
• Energy (electricity, gas, fuel and steam) except when used to produce goods for sale or purchased by farms

It is important to note that the reporting requirements for restricted ITC’s are specific and they will be “recaptured” rather than denied. The ITC recapture will be required to be reported in the GST/HST NETFILE return as follows:

A. Gross ITC’s (ITC’s before the recaptured amounts) will be reported in a separate information field on the GST/HST return
B. Recaptured ITC’s will be reported in a separate information field on the return
C. The net amount of ITC’s (A - B) will then be reported in another information field on the return

The recapture of ITC’s must be done in the reporting period when the ITC’s first become available, even if the ITC itself has not been claimed. Failure to recapture the ITC’s in the appropriate period could expose businesses to interest and penalties.

We Can Help

The proposed GST/HST reporting and filing changes will present challenges for most registrants. Although the implementation date is July 1, 2010, we can assist in planning and ensuring that your organization has made the necessary modifications to systems and routines to accommodate the changes.