Archived [2013-04-01] - Directive on the Application of the Goods and Services Tax/Harmonized Sales Tax

1.1 This directive takes effect on July 1, 2010.

1.2 It replaces the following:

• Policy on the Application of the Goods and Services Tax and the Harmonized Sales Tax in the Departments and Agencies of the Government of Canada – For FIS Compliant Departments and Agencies (dated March 1, 2000); and
• Policy Notice - Reduction in the Rate of the GST/HST - (dated June 13, 2006 and December 21, 2007).

2.1 This directive applies to departments as defined in section 2 of the Financial Administration Act (FAA) unless excluded by specific acts, regulations or orders in council.

2.2 Those portions of this directive that provide for the Comptroller General to monitor compliance with this directive within departments and request departments to take corrective action, do not apply with respect to the Office of the Auditor General, the Office of the Privacy Commissioner, the Office of the Information Commissioner, the Office of the Chief Electoral Officer, the Office of the Commissioner of Lobbying, the Office of the Commissioner of Official Languages, and the Office of the Public Sector Integrity Commissioner. The deputy heads of these organizations are responsible for monitoring and ensuring compliance with this directive within their organizations, as well as for responding to cases of non-compliance in accordance with any Treasury Board instruments that address the management of compliance.

3.1 This directive supports the Policy on Internal Control by outlining the roles and responsibilities of chief financial officers and departmental managers in charging, collecting, remitting and paying the Goods and Services Tax (GST) and the Harmonized Sales Tax (HST) where applicable. This directive establishes a consistent approach that ensures that departments charge and collect GST or HST on their taxable supplies of goods or services and pay GST or HST on their purchases as required by the relevant legislation.

3.2 The Government of Canada must comply with Part IX of the Excise Tax Act and its related schedules and regulations. The purpose of this directive is to ensure the proper application of Part IX of the Excise Tax Act and its related schedules and regulations by federal government departments with respect to the GST/HST.

3.3 In 1997, the Excise Tax Act was amended to establish the HST. The HST is a single harmonized value-added tax that replaces the provincial retail sales taxes and the federal GST in certain provinces. To participate in the HST, each of these "participating provinces" signed a Comprehensive Integrated Tax Coordination Agreement (CITCA) with the federal government. Under these CITCAs, the federal government has agreed to pay the HST on purchases and to collect and remit the HST on the taxable supplies it provides.

3.4 Government departments must also comply with the provisions of Part 4 "First Nations' Sales Tax" of the Budget Implementation Act, 2000, and the First Nations Goods and Services Tax Act (PDF - 322 KB) because some First Nations levy a sales tax that is fully harmonized with the GST. This directive applies to the First Nations' taxes that are levied to comply with these two statutes.

3.5 The federal government entity comprising all departments is registered for GST/HST purposes with the Canada Revenue Agency (CRA) as one registrant under Business Number 121491807 with a unique RT0001 for each reporting entity. Interdepartmental transactions are, therefore, not subject to GST/HST. Each department that provides taxable goods or services is responsible for requesting a GST/HST specific account that is identified by an RT extension plus four digits.

3.6 Subsection 239(1) of the Excise Tax Act provides the basis for a department to file a separate GST/HST monthly return, if necessary.

3.7 The Comptroller General has delegated the authority to add to, delete from or make any other amendments to the register of Government of Canada reporting entities for the purposes of subsection 239(1) of the Excise Tax Act to deputy heads of departments. For more information, see the Guideline on the Application of Goods and Services Tax/Harmonized Sales Tax.

3.8 The GST Federal Government Departments Tax Remission Order, P.C. 1990-2854 ensures that departmental appropriations are not impacted by the Crown obligations enacted by the Excise Tax Act. The Tax Remission Order stipulates remission of the tax that is paid or payable by a department under Part IX of the Excise Tax Act. Therefore, departments are required to establish a Refundable Advance Account (RAA) as an asset financial reporting account to record the GST and the HST paid on its purchases. To properly account for the offset in the financial statements and public accounts, two reporting methods are used at:

• Month-end accounting entries are completed monthly by the CRA to offset the Refundable Advance Account departmental balances against GST/HST revenues; and
• At year-end, the actual Refundable Advance Account departmental balances are cleared and the amounts are transferred to the CRA by interdepartmental settlements.

3.9 Part III.1 of the Federal-Provincial Fiscal Arrangements Act provides for tax harmonization agreements or CITCAs between the federal government and provinces that integrate the taxes levied under Part IX of the Excise Tax Act with the provincial sales taxes.

3.10 Under Part IX "Goods and Services Tax" of the Excise Tax Act:

• Subsection 165(1) provides that "every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply…"
• Section 122 renders the obligation under subsection 165(1), as well as all other obligations provided under Part IX of the Excise Tax Act, as being applicable to the federal Crown; and
• Subsection 221(1) states that the GST/HST is to be paid to the supplier and that the supplier acts as an agent of the Crown in collecting the GST/HST payable in respect of the supply.

3.11 This directive is issued pursuant to section 7 of the Financial Administration Act.

3.12 This directive is to be read in conjunction with the Policy on Internal Control. Additional information on how to apply the requirements of this directive is provided in the Guideline on the Application of Goods and Services Tax/Harmonized Sales Tax.

Definitions to be used in the interpretation of this directive are in the Appendix.

6.1 Chief financial officers are responsible for establishing management practices and controls to ensure the efficient and effective administration of the GST/HST within their department as follows:

6.2 Departmental managers who have been assigned responsibility for managing an activity that includes the procurement of taxable goods and services are responsible for:

6.3 Departmental managers who have been assigned responsibility for managing an activity that includes the sale of taxable goods and services are responsible for:

6.4 Departmental managers who have been assigned responsibility for monthly and year-end accounting are responsible for transferring at month-end and year-end, the amount in the Refundable Advance Account to CRA. This agency then authorizes the department of Public Works and Government Services Canada to deduct these amounts from the general GST/HST tax revenue accounts pursuant to the Tax Remission Order. Note that Chapter 14, Appendix 10, of the Receiver General Manual applies.

6.5 Departmental managers who have been assigned responsibilities for managing transfer payment programs and transfer payments are responsible for specific requirements when transfer payments are subject to the GST/HST. Note that GST/HST Technical Information Bulletin B-067: "Goods and Services Tax Treatment of Grants and Subsidies" applies. Section 8 of the Guideline on the Application of Goods and Services Tax/Harmonized Sales Tax also provides more information on the transfer payments.

6.6 Monitoring and reporting requirements

7.1 In instances of non-compliance, deputy heads are responsible for taking corrective measures within their organization with those responsible for implementing the requirements of this directive.

7.2 In support of the responsibility of deputy heads to implement the Policy on Internal Control and related instruments, chief financial officers ensure corrective actions are taken to address instances of non-compliance with the requirements of this directive. Corrective actions can include requiring additional training, changes to procedures and systems, the suspension or removal of delegated authority, disciplinary action, and any combination of these measures.

7.3 Individuals are reminded that sections 76 to 81 (Civil Liabilities and Offences) of the Financial Administration Act as well as sections 121 (Frauds against the Government), 122 (Breach of Trust), 322 (Theft) and 380 (Fraud) of the Criminal Code may apply.

7.4 Organizations and individuals may be subject to consequences as set out in federal and provincial tax legislation and reciprocal tax agreements.

This section identifies other significant departments with respect to this directive. In and of itself, it does not confer an authority.

8.1 The Canada Border Services Agency (CBSA) is responsible for:

• Charging and collecting the GST/HST on goods imported into Canada; and
• Responding to enquiries from departments concerning interdepartmental settlements for paying assessed duties and the GST/HST on goods imported into Canada.

8.2 The Canada Revenue Agency (CRA) is responsible for:

• Preparing and issuing technical information on the interpretation of the Excise Tax Act;
• Responding to enquiries from departmental GST/HST coordinators concerning the technical aspects of the GST/HST, GST/HST registration or a specific GST/HST return;
• Issuing a GST/HST ruling when a formal request has been made; and
• Authorizing the remission of the GST/HST pursuant to the Tax Remission Order.

8.3 Federal, provincial and territorial tax auditors are responsible for reviewing books and records to see if taxes have been properly charged, collected, remitted and paid.

8.4 The department of Public Works and Government Services Canada (PWGSC) is responsible for issuing Chapter 14 "Year End Timetables and Procedures" of the Receiver General Manual.

8.5 The Treasury Board Secretariat (Office of the Comptroller General) is responsible for development, oversight and maintenance of this directive and for providing interpretation advice.

10.1 Please direct enquiries about this directive to your departmental headquarters or departmental GST/HST Coordinator. For interpretation of this directive, departmental headquarters or departmental GST/HST Coordinators should contact:

Financial Management Policy Application Division
Financial Management and Analysis Sector
Office of the Comptroller General
Treasury Board Secretariat
Ottawa ON K1A 0R5

E-mail address: fin-www@tbs-sct.gc.ca
Telephone: 613-957-7233
Fax: 613-952-9613

10.2 Enquiries from the departmental GST/HST Coordinators to Canada Revenue Agency may be directed as follows:

For general enquiries concerning the GST/HST:

• For service in English, telephone 1-800-959-5525; and
• For service in French, telephone: 1-800-959-7775

For enquiries concerning technical aspects of the GST/HST, contact the 1-800 numbers provided below or your local GST/HST Rulings Centres

• For service in English, telephone: 1-800-959-8287; and
• For service in French, telephone: 1-800-959-8296

For GST/HST in the province of Quebec, contact 1-800-567-4692 (Revenu Québec)

To make a formal request for a GST/HST ruling, write to:

GST/HST Rulings Centre
Ottawa Tax Services Office
Canada Revenue Agency
Ottawa ON K1A 0L9

For enquiries concerning GST/HST registration, contact:

Team Leader, Client Services
Kingston Tax Services Office
Canada Revenue Agency
Kingston ON K7L 5P3

Telephone: 1-613-541-3609
Fax: 1-613-545-3272

For enquiries concerning a specific GST/HST return or the status of the department's GST/HST account, contact:

GST Trust Compliance
Revenue Collections
Ottawa Tax Services Office
Canada Revenue Agency
Ottawa ON K1A 0L9

Telephone: 1-613-598-4641
Fax: 1-613-952-1982
TTY: 1-800-665-0354

To send a copy by fax, or to enquire about the department's
Interdepartmental Settlement (IS) Return Notification File for the GST/HST, contact:

The Shawinigan-Sud Tax Centre
General Ledger Section 534-3-1

Telephone: 1-819-536-6136
Fax: 1-819-536-4959/4843

10.3 Departments enquiries to the Canada Border Services Agency concerning interdepartmental settlements related to payment of duties and taxes on goods imported into Canada by the department may be addressed to:

Canada Border Services Agency
Northern Ontario Region
Ottawa ON K1G 6C4

Telephone: 1-613-991-5166
Fax: 1-613-991-6898