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
(Publié aussi en français sous le titre Politique relative à l'application de la taxe sur les produits et services et de la taxe de vente harmonisée dans les ministères et organismes du gouvernement du Canada
Pour les ministères et organismes conformes à la SIF)
Table of Contents
Effective date	1
Policy objective	1
Policy statement	1
Application	1
Policy requirements	1
Procedural requirements:	2
GST and HST - Charged and collected	2
GST and HST - Paid	3
Accounting	3
Monitoring	4
General	4
References	4
Authority	4
Relevant legislation	4
Treasury Board Publications	4
CCRA Publications	5
Enquiries	5
Appendix A - Glossary	7
Appendix B - Delegation of authority	8
Appendix C - General guidelines	9
Registration	9
Current year refunds	10
Refunds of previous year’s expenditures	10
Approval level	10
Collection of GST and HST	11
GST and HST - Payments	14
Accounting	17
Appendix D - Monthly returns to CCRA and deposit advice	19
Appendix E - GST/HST rules on the provision of taxable supplies	21
Introduction	21
Charging of GST and HST	21
Discounts and interest	21
Classification of supplies	21
Invoice format	22
Appendix F - GST exemption for Federal Government in providing water, sewerage and drainage supplies	24

Effective date 
The present document contains the entire text of the policy as revised on March 1, 2000.
Policy objective
To ensure the effective and efficient processing of the Goods and Services Tax and the Harmonized Sales Tax within the Government of Canada. 
Policy statement
It is government policy that departments charge and collect, where applicable, the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST) on their taxable supplies and pay GST or HST on their purchases, as required by legislation. 
Application
This policy applies to all organizations that are FIS compliant and considered to be departments within the meaning of section 2 of the Financial Administration Act (FAA). It applies from the date (fiscal year) that the organization becomes FIS compliant. Departments that are not yet FIS-compliant shall continue to use the information contained in the original policy dated December 12, 1997.
Policy requirements
(a)	Departments, as suppliers, are required to charge, collect, deposit and report HST In Newfoundland and Labrador, Nova Scotia and New Brunswick (the participating provinces) or GST in all other provinces (the non-participating provinces) in respect of taxable supplies made by Her Majesty in Right of Canada. (See Appendices A to F for specific guidelines and information.)
(b)	Departments must ensure that adequate policies and procedures are issued for the    administration of both the HST and the GST.
(c)	The Government of Canada's Business Number for the purposes of both HST and GST is 121491807RT0001. That number must be shown on invoices and/or receipts for goods and services supplied by departments. Since the Government of Canada has been registered as one entity for the purposes of the GST and HST, no GST or HST is to be charged or paid on inter-departmental transactions.
(d)	Departments that are GST registrants are automatically registered for the HST and therefore do not require a separate registration.
(e)	Departments which elect to have more than one reporting entity shall ensure that each reporting entity so designated maintains independent records, accounts and audit trails of its outputs and revenues and that these records meet all the legislative requirements.
(f)	All GST and HST revenues are to be recorded in the Accounts of Canada on an accrual basis.  
(g)	Departments must therefore keep the GST and HST charged to their customers on an accrual basis in liability accounts, until the amounts are transferred to Canada Customs & Revenue Agency (CCRA). Each department and subdivision thereof, designated as a reporting entity for GST and HST purposes, must submit monthly returns of GST charged to CCRA as required by legislation. The GST charged is transferred to CCRA in the same period as the return is filed, using an Interdepartmental Settlement. (Please see Appendix D – Monthly returns to CCRA and deposit advice.)
(h)	Departments shall record all GST and HST  payable on purchases from external parties, including purchases made on behalf of other departments, to the asset account entitled GST Refundable Advance Account (RAA). Departments are to transfer these amounts to CCRA on the last working day of March basis so that CCRA can prepare the Tax Remission Order to authorise them to deduct these amounts from the GST Tax Revenue accounts at year-end.
Procedural requirements: 
GST and HST - Charged and collected
(a)	The GST or HST portion of each supply will be recorded at the time transactions are invoiced in the departmental accounts. The whole amount of the sale including the related GST/HST will be recorded as an account receivable. (Please note that PST transactions are ignored for these examples)
Example: 
1) On Sales:	Accounts Receivable	$107.00
		Sales		$100.00
		GST/HST payable to CCRA		$ 7.00
(b)	When departments receive payment for the above sales the full amount of the payment including the GST/HST shall be deposited and credited to the account receivable.
2) At collection time:	Bank		$107.00
		Accounts Receivable		$107.00
(c)	In the month that the sale (for the previous month) is to be reported on the return to CCRA, the GST/HST payable will be transferred by departments to CCRA by Interdepartmental Settlement in that same month.
3) Monthly:	GST/HST Payable to CCRA	$7.00
		IS (Credit Control Account)		$7.00
GST and HST - Paid
(a)	Departments are to record the GST or HST due to the suppliers at the same time as the related goods or services are recorded to the departmental accounting system. The GST/HST due will be recorded in the Refundable Advance Account. The full amount of the invoice will be recorded as an account payable. 
Example: 
1) On purchases:  Operating expense or other account 
	Operating Account	$100.00
	GST/HST Refundable RAA	$7.00
		Accounts Payable		$107.00
2) At payment time:  
	Accounts Payable	$107.00
		Cash		$107.00
3) Year end: To transfer account to CCRA:
		IS (Debit Control Account)	$7.00
		GST/HST Refundable RAA		$7.00
Accounting
(a)	Departments must maintain a proper audit trail with supporting documents including receipts, invoices, sales invoices and expense claims for all charges to the RAA.
(b)	As for any other financial records, all books and records relating to GST and HST receipt, payment and accounting must be retained for a period of six full years after the end of the year to which they relate.
Monitoring
General
(a)	The Treasury Board Secretariat will monitor the effectiveness of this policy by reviewing departmental audit and performance monitoring reports and audit reports from CCRA.
(b)	The collection and reporting of the GST and HST by departments will be subject to audit by CCRA in the same manner as any other GST/HST registrant.
References
Authority
This policy is issued under the authority of Section 7 of the Financial Administration Act.
Relevant legislation
Excise Tax Act, Part IX
GST Federal Government Departments Remission Order, P.C. 1990-2854, December 21, 1990, Canada Gazette Part II, Vol. 125, No. 3, p. 763.
Finance Vote L29g, Appropriation Act No. 2, 1967 as amended by Supply and Services Vote L15b, Appropriation Act No. 3, 1990.
Treasury Board Publications
The Treasury Board Secretariat Policy on the Collection and Remittance of Provincial Sales Taxes (Application of Reciprocal Taxation Agreements and Comprehensive Integrated Tax Coordination Agreements). This policy is available in electronic format only. It can be accessed through the TBS Web site on the government enterprise network (GENET), the new federal government internal network, at the following address:
http://publiservice.tbs-sct.gc.ca/
and the TBS site on the internet at:
http://www.tbs-sct.gc.ca
CCRA Publications
Technical Information Bulletin B-039R: Application of GST to Indians
Technical Information Bulletin B-067: Goods and Services Tax Treatment of Grants and Subsidies
GST Memorandum 500-6-2: Provincial Governments
Goods and Services Tax Return for Registrants (Form GST-34E)
Taxation Information Circular 75-6R: Required Withholding from Amounts Paid to Non-Resident Persons Performing Services in Canada
Technical information bulletin B-076: Proposed rebates for printed books, audio recordings or printed books, and printed versions of religious scriptures under the GST/HST
Technical information bulletin B-077: Transitional Provisions Under the HST
Technical information bulletin B-078: Place of Supply Rules under the HST
Technical information bulletin B-081: Application of the HST to Imports
Enquiries
(a)	Enquiries about this policy should be directed to your departmental headquarters GST/HST coordinator.
(b)	Enquiries from GST/HST coordinators regarding this policy and guidelines (e.g., procedures to recover GST or HST paid, how to account for the municipal rebate of GST or HST on inputs used in making exempt supplies of unbottled water, etc.) should be directed to:
Financial Management and Accounting Policy  Division
Deputy ComptrollerGeneral Branch
Treasury Board Secretariat
Ottawa, Ontario
K1A 0R5
Telephone: (613) 957-7233 
Facsimile:  (613) 952-9613
Internet:
dgc-scginformation@tbs-sct.gc.ca
x400:c=ca;a=govmt.canada;p=gc+tbs.sct;s=dcg-scginformation
Enquiries from GST Coordinators on the technical processing of the GST and HST legislation (e.g., the tax status of payments made to individuals, the eligibility to claim full tax remission of GST or HST incurred on inputs, etc.) should be directed to:
CCRA
Telephone: Local Numbers:  (613) 957-8109  (English) and 957-9864 (French)
Toll Free Numbers:  1-800-959-5525 (English) and 1-800-959-7775 (French)
Facsimile:  (613) 957-8130
Written requests for tax rulings, etc., should be addressed to:
Manager, Interpretation and Services Ottawa District Office
CCRA
333 Laurier Ave. West Ottawa, Ontario
K1A 0L9

Appendix A - Glossary
Direct cost (coût direct)  is, in the case of goods produced by the public service body, the direct material cost of the goods. In the case of property or services purchased by the public service body for resale, the direct cost is the purchase price paid by the public service body. The direct cost of a service that is performed by a public service body's own members or employees includes only the cost of materials expended in the process of performing the service (i.e., excludes labour, capital and overhead costs). In the case of admission charges for films, slide shows or similar presentations, the direct cost includes only the rental cost of film and equipment used for the presentation. In all the foregoing cases, the direct cost includes any GST paid, less any input tax credits or rebates which the organizations may be entitled to take.
Non-participating province (province non participante)  Non-participating provinces include British Columbia, Saskatchewan, Manitoba, Ontario, Quebec and Prince Edward Island. Alberta, Nunavut and the Northwest Territories do not currently have a retail sales tax in place.
Participating province (province participante)  refers to New Brunswick, Nova Scotia and Newfoundland and Labrador, the provinces named in Part IX of the Excise Tax Act as participating in the Harmonized sales tax.
Public service body (organisme de services publics)   refers to a non-profit organization, charity, municipality, school authority, hospital authority, public college or university.
Real property (immeuble)  includes (a) in respect of property in the Province of Quebec, immovable property and every lease thereof, (b) in respect of any property in any other place in Canada, messuages, lands and tenements of every estate or interest in real property, whether legal or equitable, and (c) a mobile home, a floating home and any leasehold or proprietary interest therein.

Appendix B - Delegation of authority
Authority is hereby delegated to the deputy heads of all federal government departments, as the term is defined in the Financial Administration Act, to add to, delete from or make any other amendments to the Government of Canada reporting entities register for the purposes of sub-section 239(1) of the Excise Tax Act, as may be appropriate with respect to that portion of the Public Service for which the deputy head is responsible.
The Comptroller General

Appendix C - General guidelines
Registration
Registration of reporting entities under Goods and Services Tax (GST) and the Harmonized Sales Tax (HST)
(a)	The Government of Canada has been registered as one entity for the purposes of the GST and HST. The authority to amend the departmental reporting entities for GST purposes was delegated to departments by the Comptroller General. A copy of the delegation of authority is attached in Appendix B.
(b)	The following principles should be considered before an entity is eligible to file separate returns: 
–	the reporting entity must have separate accounting books and records;
–	adequate accounting systems and controls are in place, and a clear audit trail is established;
–	the reporting entity must be able to comply with the classification of output requirements outlined; and
–	the reporting entity is responsible for meeting the reporting requirements and is prepared to be held fully accountable for transferring GST/HST to CCRA.
Processing for branches (reporting entities) to file separate returns
The following procedure applies to any amendment to the information submitted to CCRA - Excise/GST on "Filing GST by Branch (Reporting Entity)". This direction applies also to HST: 
–	Complete the form for "Addition/Deletion/Amendment", one for each reporting entity.
–	Complete form GST 10 "Application for Branches/Divisions to File Separate Returns". Note that information in Part A of the form cannot be altered. The deputy minister must sign the form or an official formally designated.
–	Send the original of the above forms to District Director, Ottawa District Excise/GST Office, CCRA, P.O. Box 8257, Ottawa, Ontario, K1G 3H7, with a covering letter directing Excise/GST to notify the "sender" after the information is processed.
Current year refunds
Departments which return goods to suppliers are responsible for matching refunds back to the original GST or HST charges and for making the necessary credit entries to the Refundable Advance Accounts. 
Refunds of previous year’s expenditures
For refunds of previous year’s expenditures, the portion representing the actual cost of the goods or services should be coded against "refunds of previous year’s expenditures". Any GST or HST refunded should be credited to the RAA of the current year.
Approval level
General
Where a specific payment or the total amount that may be paid is limited by legislation, regulation, or Treasury Board policy, this limit usually includes any duties and taxes associated with the payment. The application of this principle depends upon the wording of the particular legislation, regulation or policy which may specifically exclude taxes and duties from the limitation by using wording such as plus applicable duties and taxes. In the absence of such wording, the limit is inclusive of duties and taxes.
Total Estimated Costs (TEC) of projects/programs
(a)	The TEC of a major project or program must be developed to disclose costs both including and excluding GST and HST. Since the total estimate of payments to be made for a project includes GST and/or HST, the project approval must relate to this figure.
(b)	The TEC net of GST and/or HST is the estimated amount that will be charged to departmental budgets and is therefore the project control amount. This is the figure to be used to determine if cost overruns have occurred. Submissions to obtain Treasury Board approval must also include GST and/or HST in the total.
Contract approval level
Comparable to the situation with TEC, the contract value, which includes the GST and/or HST, determines the level of authority needed to approve the contract.
Payment requisitioning
Similarly, payment requisition authority must be adequate to cover both the GST and non-GST portions of a payment as well as the HST and non-HST portions, where applicable.
Collection of GST and HST
Purchaser's failure to pay GST or HST
When a purchaser of government goods and services refuses to pay the GST or the HST on cash sales, the goods and services should not be provided. When a purchaser refuses to pay the GST or HST on a credit sale, the tax must be set up as an account receivable and pursued in the normal fashion.
Provincial and territorial government entities
(a)	In general, provincial governments are immune from federal taxation. For the purposes of GST administration, the term "provincial government" includes all provincial departments and ministries. The exception is the provincial departments and ministries in New Brunswick, Nova Scotia and Newfoundland and Labrador (the HST participating provinces), as well as the governments of Yukon, Nunavut and the Northwest Territories.
(b)	With respect to the HST, both the federal government and the governments of Newfoundland and Labrador, Nova Scotia and New Brunswick have agreed to pay the HST on all taxable supplies.
(c)	A Reciprocal Taxation Agreement (RTA) between the Government of Canada and the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Prince Edward Island (the non-participating provinces) andYukon, Nunavut and Northwest Territories,  is in place in order to set out arrangements regarding the reciprocal payment of taxes and fees levied by the respective governments. Each agreement contains a listing of Crown corporations, boards, commissions and agencies included in the provincial/territorial entity. These organizations, as well as provincial/territorial departments and ministries, are entitled to purchase goods and services without paying GST.
(d)	Details are set out in the Policy on the Collection and Remittance of Provincial Sales Taxes (Application of Reciprocal Taxation Agreements and Comprehensive Integrated Tax Coordination Agreements).
(e)	When selling to the departments and agencies of the non-participating provincial and territorial governments, it is essential to know which organizations form part of these entities for the purposes of the GST. Departments should contact their local District Excise/GST Office of CCRA periodically to confirm the status of a particular organization if there is any doubt as to whether it is part of the provincial/territorial entity. (Reference: GST Memorandum 500-6-2: Provincial Governments)
(f)	When purchasing goods and services free of GST, the non-participating provincial and territorial governments may choose to use a certification to support their tax-free status. For example: 
This is to certify that the property and/or services ordered/purchased hereby are being purchased by (Name of provincial/territorial government department or institution)
with Crown funds, and are therefore not subject to the Goods and Services Tax
(Signature of Authorized Official)
(g)	Such certification would normally be included on procurement documents such as purchase orders and contracts. However, in any case, departments must obtain and maintain, on file, sufficient evidence to support the tax-free status of a purchaser who has not been charged GST on taxable supplies.
(h)	As of April 1, 1997 the current retail sales taxes in Nova Scotia, New Brunswick, Newfoundland and Labrador and the federal goods and services tax in those provinces were replaced by the HST. The HST applies at a rate of 15 per cent to those goods and services that are currently subject to GST.
(i)	The provincial component of the HST is based on the sharing formula, which is set out in the comprehensive integrated tax collection agreements (CITCA).
Tax-free purchases by Indians and Indian Bands
(a)	Generally, individual Indians and Indian Bands may purchase goods free of GST when the goods are delivered to a reserve. Services are free of GST when they are performed on reserve for Indians or when a band purchases them for band management activities.
(b)	When providing taxable supplies to Indians and Indian Bands tax free, departments must maintain evidence of tax-free status of the purchaser, including evidence of delivery to a reserve when applicable. (Reference: Technical Information Bulletin B-039R - Application of GST to Indians)
(c)	This section applies also to individual Indians and Indian Bands within the HST participating provinces.
Taxable benefits
(a)	Some employee benefits are subject to GST or HST. CCRA is the source for determining which benefits are subject to GST or HST and which benefits are to be included in a person's income for Income Tax purposes. HST will apply to the employee benefit when the place at which the employee last reported for work is in a participating province.
(b)	Generally, an employee benefit will be subject to GST or HST where the benefit is a good or service which is neither zero-rated nor exempt and which is required to be included in computing the employee's income according to paragraph 6(1)(a) or (e) or subsection 15(1) of the Income Tax Act. Rather than the employee paying the GST or HST on the benefit directly, he or she accounts for it by the amount being included in his or her income as part of the taxable benefit.
(c)	When a department pays a supplier for goods or services which are used to provide a taxable benefit to an employee, any GST or HST included in the payment may be charged to the Refundable Advance Account (RAA). When the taxable benefit is included in the employee's income for the year, GST or HST must be added to the amount of the benefit. In effect, the employee "pays" the GST or HST on the benefit and the department "collects" it. The department is "deemed" to have collected GST or HST from the employee and the GST or HST is deemed to have been paid by the employee on goods and services received from the department as a private individual.
(d)	Departments do not need to account for deemed collections of the GST or HST in the February GST/HST return in respect of employees' taxable benefits under section 173 of the Excise Tax Act. However, departments must meet other requirements of the section in respect of appropriate GST or HST amounts to be included in computing an employee's taxable income.
Provincial Sales Taxes (PST) on government sales
(a)	In non-participating provinces Departments should calculate the PST on supplies independently from the GST calculation, using the rates and methods set by the respective provincial governments.
(b)	PST is applied differently by different provinces. The major difference is whether or not the GST is included in the price on which PST is calculated. The decision to apply PST on top of the price plus GST or on the price net of GST rests with each province and is subject to change at any time. The processing methods of each province for PST are outlined below.
(c)	PST on top of GST: 
–	Quebec;
–	Prince Edward Island.
(d)	PST on the price net of GST: 
–	Ontario;
–	Manitoba;
–	Saskatchewan; and,
–	British Columbia.
(e)	Alberta and the Territories do not impose retail sales taxes at this time.
(f)	Within participating provinces HST is applied directly to the price of the taxable supply.
GST and HST - Payments
Imported goods
(a)	Goods imported into Canada are generally subject to the GST or HST. If the foreign supplier is a GST/HST registrant, departments shall pay the GST or HST invoiced by the supplier.
(b)	If the foreign supplier is not a GST/HST registrant, and GST or HST is payable either directly to the CCRA  or through a customs broker, departments shall  pay the GST or HST. Payment of GST/HST may be made to the CCRA through the interdepartmental settlement system or by cheque in the case of a customs broker. 
Invoices lacking GST or HST information
When a department receives an invoice for payment which includes GST or HST and the invoice does not comply with the format requirements, (see Appendix E), an amended invoice should be requested from the supplier, as the invoice in the prescribed format is the required documentation for remission of the tax paid.
Invoices without GST or HST included
(a)	When invoices are received which do not include GST or HST; that is, the appropriate tax has not been charged, the action required by departments will depend on the specific circumstances.
(b)	Purchases from non-registrants (such as small suppliers whose total revenues from taxable supplies in the four calendar quarters preceding the particular quarter do not exceed $30,000) are not subject to GST or HST and may be paid without any tax implications. If a vendor claims to be a non-registrant or there is doubt concerning this status due to additional knowledge of staff about the vendor, a confirmation of the status may be sought from the local District Excise/GST Office of CCRA. Otherwise, the invoice should be paid as presented.
(c)	When a contract exceeds $30,000 or there is a reason to believe that a vendor is required to be a GST/HST registrant, the vendor should be contacted and requested to amend the invoice. If the vendor refuses to comply, the invoice should be paid as presented, the case referred to the District GST/HST Office of CCRA for enforcement action and the vendor informed of the referral to CCRA.
(d)	A non-resident may register for purposes of the GST and HST. If an invoice from a non-resident supplier includes GST or HST and meets all of the invoice format requirements, such as disclosure of the business number, the invoice should be paid as presented and the GST or HST charged to the RAA in the usual manner. If there is any reason to question the legitimacy of the supplier charging GST or HST, the case may be referred to the District Office of CCRA to ascertain the registrant status of the supplier.
Cost reimbursement
Reimbursement of costs of external parties
(a)	There are agreements of various types (contracts, contribution agreements) which include provision for departments to reimburse the costs of external parties. The treatment of GST or HST depends on the type of situation and the recipient of the reimbursement. The following criteria apply: 
–	the costs that may be reimbursed are net of any input tax credits (ITCs) or other form of rebate of GST or HST to which the recipient may be entitled;
–	if the recipient is a GST/HST registrant and the supply is taxable, the amount specifically paid as GST or HST to the recipient by the department may be charged to the RAA; and,
–	if the recipient is not a registrant, no GST or HST will apply to the payment to the recipient by the department and no amount may be charged to the RAA even if the costs being reimbursed include GST paid by the recipient.
(b)	Departments should ensure that agreements include a definition of the costs to be reimbursed and that such costs are net of any input tax credits or rebates. In addition to ITC’s on commercial operations, full or partial rebates may be claimed by non-profit organizations, registered charities, municipalities, universities, schools, hospitals, diplomats and international organizations.
GST and HST on expenses reimbursed to employees
(a)	The RAA may be charged with GST and/or HST on expenses reimbursed to employees only where those expenses were incurred in Canada and, thus, originally subject to GST or HST. Where a claim includes expenses incurred both within and outside Canada, the GST or HST to be charged to the RAA is to be calculated only on the Canadian portion thereof.
(b)	The two methods available for the calculation of the amount of GST on reimbursable expenses that may be charged to the RAA are: 
–	6/106ths - This method consists of calculating 6/106ths or 5.66 per cent of the total amount of reimbursable expenses on a claim and charging this amount to the RAA. For example: the GST amount on a petty cash claim would be 5.66 per cent of the total claim; for travel, it would be 5.66 per cent of the total amount of the claim less the portion prepaid by the department (usually airfare).
–	7/107ths plus actual - This method consists of: 
(i)	calculating 7/107ths or 6.542 per cent of allowances such as per diem meal and incidental allowances and kilometric rates; and,
(ii)	determining the actual amount of GST incurred on all expenses other than allowances and prepaid expenses on the claim; for example, hotel and taxi bills on travel expense claims.
(c)	In some cases, the actual amount of GST will be shown on the bills while, in other cases, it will be necessary to calculate the GST imbedded in a tax-included price shown on the bill.
(d)	The total of (i) and (ii) is the amount that may be charged to the RAA.
(e)	There are two methods available for the calculation of the amount of HST on reimbursable expenses that may be charged to the RAA. These are: 
–	14/114ths - This method consists of calculating 14/114ths or 12.28 per cent of the total amount of reimbursable expenses on a claim and charging this amount to the RAA. Similar to the previous example, the HST amount on a petty cash claim would be 12.28 per cent of the total claim; for travel, it would be 12.28 per cent of the total amount of the claim less the portion prepaid by the department (usually airfare).
–	15/115ths plus actual - This method consists of: 
(i)	Calculating 15/115ths or 13.04 per cent of allowances such as per diem meal and incidental allowances and kilometric rates; and
(ii)	Determining the actual amount of HST incurred on all expenses other than allowances and prepaid expenses on the claim; for example, hotel and taxi bills on travel expense claims.
The total of (i) and (ii) is the amount that may be charged to the RAA.
(f)	Departments may choose to apply one of the above methods to all expenses reimbursed to employees or may select one for each type of reimbursable expenses such as travel, relocation, hospitality, petty cash, memberships, course fees, etc.
(g)	Departments must maintain information identifying the method(s) chosen and documenting the reasons for the choice(s). The methods(s) chosen must be applied consistently throughout the entire department for a complete year. Any change of method must be implemented as of the beginning of a fiscal year and be documented with the reasons for change.
Accounting
Accounts Payable at year-end 
The GST and HST component of the accounts payable at year-end should be treated as old-year and recorded in the GST refundable account in the old year.
Year-end accounting
(a)	The balances in the departmental Refundable Advance Accounts (RAA) are ideally cleared at year-end and transferred to CCRA, who will obtain the necessary tax remission order. 
(b)	The balance in each departmental GST/HST liability account will no longer be reported by the department in the "General Summary - Revenue by Main Classification of Volume II, Part l" of the Public Accounts. Amounts will have been transferred to CCRA during the year and, the GST/HST liability at year-end for sales made during March will be transferred to CCRA in the first month of the new year. 
Charges to the Refundable Advance Account (RAA)
(a)	Only GST and HST payments for which an offset is available pursuant to the Tax Remission Order may be charged to a department's RAA. Generally, there are two classes of payments of GST and HST, which may be offset pursuant to the Tax Remission Order. These are: 
(i)	GST and HST on taxable supplies of goods and services payable by a department; and
(ii)	GST and HST paid on reimbursable expenses incurred by public servants and other individuals appointed as agents of Her Majesty (such as Commissioners and board members appointed by the Governor-in-Council) in the course of carrying out government business. Travel and hospitality expenses are examples.
(b)	However, where tax has been paid in error on a purchase made by a government department, the GST or HST paid should be charged to a department's RAA.
Interest on late payments
(a)	The interest charges on overdue accounts are to be calculated on the total invoice amount, including any GST and/or HST and any other taxes and duties due. These charges represent the extra financing cost of carrying the overdue amounts and apply equally to taxes as to the price of the goods and services billed or purchased. 
(b)	The charging of interest on late payments applies to both accounts receivable owing to the government and to late payments made by the government. The interest payable to suppliers on any late payment (including that on the GST or HST portion of the account) is to be charged to a departmental appropriation in the case of interest paid by the government and credited to non-tax revenue in the case of interest received.

Appendix D - Monthly returns to CCRA and deposit advice
(a)	This appendix will provide details about aspects of reporting that are specific to the Government of Canada.
(b)	Each reporting entity is assigned an internal business number for HST and GST purposes. This number should be used only for the purpose of preparing monthly returns and should not be confused with the business number assigned to the Government of Canada.
(c)	A monthly return, The Goods and Services Tax Return for Registrants (Form GST-34E), must be submitted to CCRA by every reporting entity by the end of the month following the month being reported. This form is also used to report HST revenues. Total revenue reported is the sum of GST and HST revenue. The basic information identifying the reporting entity, etc. is pre-printed on the form by CCRA. Among other information, the pre-printed form includes: 
–	the reporting entity number in the box titled GST Account Number on both the top and bottom sections. This is not the Government of Canada business number but the reporting entity's own number for reporting purposes;
–	the information on address and telephone number may be changed in CCRA's records by completing the Notification of Change stub attached to the envelope supplied with the return and sending the form to CCRA with the monthly return. The departmental GST coordinator must request the addition, the deletion or change in name of the reporting entity;
(d)	The completion of the monthly return by reporting entities of the Government of Canada is somewhat different from that required of other registrants. In the top portion of the form, reporting entities should complete only boxes 101, 103, 104, 105, and 113a, 113b and 113c . In the bottom portion only boxes 101, 105, and 109 must be completed. The box for Input Tax Credits (box 108) should not be completed as the Refundable Advance Account fulfils that function for government departments. 
(e)	The standard publications on the completion of the return issued by CCRA should be used. In addition, departments should note that: 
–	Box 103 is the sum of GST and HST actually charged and accounted for the GST/HST Liability Account during the period. It includes GST and HST billed in accounts receivable which have not been collected, and adjustments to amounts reported in prior periods;
–	Box 104 is the amount of GST and HST applicable to any refunds, returns or other price adjustments which occurred during the period for which GST and/or HST was reported on a previous monthly return, and for which entries were made to the GST/HST Liability Account. These adjustments would usually result in a refund cheque being issued to the client.
The GST and HST portion of the refund would be debited to the GST/HST Liability Account. 
(f)	In addition to the monthly return, departments shall send an Interdepartmental Settlement (IS) to CCRA for each month for which the entity reports GST and/or HST. This IS replaces the cheque which would be submitted by other registrants. The amount reported on the IS form must be identical to the net amount entered into the GST/HST Liability Account for the period. 
(g)	The originating department is the name of the department of which the reporting entity is a part. The branch name is the name of the reporting entity and should be the same as shown in the name box on the bottom portion of the return. The authorized signature is the signature of the designated contact person for the reporting entity.
(h)	For months in which there are neither GST nor HST amounts recorded nor any adjustments, a "NIL" return must be completed and forwarded. 
(i)	In the event that a reporting entity has adjustments, which result in a negative amount, the monthly return should be completed showing the negative amount. CCRA should theoretically issue a refund, but will not do so in this case, as it would for other registrants, since the entries to the GST/HST liability account will have been made previously as a result of processing the refund(s).

Appendix E - GST/HST rules on the provision of taxable supplies
Introduction
(a)	This appendix is included as general information only. Departments are strongly encouraged to obtain taxable status rulings officially from the local GST/HST Excise District Office to avoid any possible misinterpretation of the Act.
(b)	There are two types of GST/HST rulings: processing rulings and advance rulings. Both are specific to a clearly defined factual situation of a particular registrant or other person and are issued only when all relevant facts are provided. An interpretation is a general written explanation of how the law will apply. A GST/HST interpretation may apply to departmental programs as a whole, but does not bind CCRA or absolve departments from GST or HST liabilities if they erroneously apply the interpretation or opinion to a specific transaction.
Charging of GST and HST
When fees and rates are set by regulations, GST or HST is to be charged on these fees and rates where taxable goods and services are supplied, as the fees are not considered to be "tax included" prices.
Discounts and interest
Both HST and GST are calculated on the net price of goods and services. Discounts for volume purchasing, provided at the time the supplier issues an invoice, are a reduction in the price and, therefore, GST or HST are applied to the price after such discounts are taken into account. Interest charges for late payment and discounts for early payment are financial charges, and as such do not affect the amount of GST or HST applicable to the transaction. If a supplier provides a volume discount after having charged the GST or HST, the supplier may adjust the GST or HST where it was not collected or refund or credit the GST or HST, where it was collected. The supplier may also provide the volume discount without adjusting, refunding or crediting the GST or HST. It is up to the supplier to decide at what point in the transaction the discount is to apply.
Classification of supplies
(a)	The general rule of the legislation is that all goods and services supplied by a vendor are taxable at seven per cent in the case of GST or 15 per cent in the case of HST, unless specifically identified otherwise. For example, zero-rated (taxable at zero per cent), exempt or deemed not to be a supply under the Excise Tax Act. Since the federal government is registered as one entity, interdepartmental sales are not subject to either HST or GST.
(b)	The destination of the output, i.e., for export, also affects its tax status. Exports are zero-rated in specified circumstances.
(c)	The tax status of each output and the rationale for the decision should be maintained on file and regularly updated for administrative and audit purposes.
(d)	The supplies to be identified when classifying outputs include all sales to parties external to the federal government entity, whether they are recorded as non-tax revenues, revenue credited to the vote (including revolving funds), or receipts to non-budgetary funds and accounts.
(e)	Supplies provided for non-monetary consideration to parties outside the government, by way of barter, transfer or exchange, are subject to GST and/or HST, depending upon the tax status of the supplies bartered, transferred or exchanged.
Invoice format
(a)	The legislation permits the GST and HST to be recorded in one of two ways: included in the price of the supply or disclosed as a separate line item. For ease of billing, making price adjustments, facilitating the purchaser's claim for input tax credits and accommodating GST and HST rate changes, departments are encouraged to adopt the separate line disclosure option.
(b)	In general, the invoice requirements of the GST/HST legislation follow normal business practice with the addition of information specific to the GST or HST charged and the business number. Invoices in this context also means "receipt" for cash sales where no invoice is issued. The disclosure requirements for invoices are: 
–	For invoice amounts under $30: 
(i)	the name of the department or agency;
(ii)	the due date or date of receipt; and
(iii)	the total amount paid or payable for the supply (inclusive of GST or HST).
–	For invoice amounts between $30 and $150: 
(i)	all requirements for invoice amounts under $30;
(ii)	the total amount of GST or HST charged on supply or, if prices are on a tax-included basis, a statement to this effect (where the invoice concerns one or more taxable supplies and one or more supplies to which tax does not apply, the tax status of each will have to be shown. A statement that "prices include GST or HST where applicable" will not meet this requirement.); and
(iii)	the government's business number: 121491807 RT 0001.
–	For invoice amounts of $150 or more: 
(i)	all requirements for invoice amounts between $30 and $150;
(ii)	the purchaser's name, trading name or the name of his or her duly authorized agent or representative;
(iii)	sufficient information to ascertain the terms of sale (e.g., cash sale, discount for prompt payment, etc.); and
(iv)	a description sufficient to identify the supply.

Appendix F - GST exemption for Federal Government in providing water, sewerage and drainage supplies
(a)	Section 22 of Part VI of Schedule V of the Excise Tax Act (ETA) exempts a supply service of installing, repairing, maintaining or interrupting the operation of a water distribution, sewerage or drainage system that is made for a municipality or by an organization that operates a water distribution, sewerage or drainage system and that is designated by the Minister of the Canada Customs and Revenue Agency (CCRA) (formerly the Department of National Revenue) to be a municipality for the purposes of that section. Section 23 of Part VI of Schedule V to the ETA exempts a supply of unbottled water (other than a zero-rated supply and a supply of water dispensed in single servings to consumers through a vending machine or at a permanent establishment of the supplier) when made by a person other than a government or by a government designated by the Minister of the CCRA to be a municipality for the purposes of that section. In addition, this section exempts the service of delivering water when the service is supplied by the supplier of the water and that supply of water is exempt. 
(b)	However, the amendment of the section as announced by the Minister of Finance on March 27, 1991, effective January 1, 1991, limits the exemption to a municipality or an organization that operates a water distribution, sewerage or drainage system and that is designated by the Minister of National Revenue to be a municipality for purposes of that section.
(c)	Effective September 1, 1992, the federal government GST/HST registrant was designated a municipality for purposes of the sections cited above. As a designated municipality, departments and agencies of the federal government which make such supplies do not collect GST/HST on these supplies nor are they eligible to claim full tax remission of the GST/HST on inputs used to make these exempt supplies. Rather, federal departments and agencies located outside of the participating provinces of Newfoundland and Labrador, Nova Scotia and New Brunswick, claim the municipal rebate of 57.14%. For those located in the participating provinces, the following rebate rates apply:
	Federal Component of the HST (i.e. 7%) 	Provincial component of the HST ( i.e. 8%)	
		NS	NB	NFLD/ LAB	
Municipalities	57.14%	57.14%	57.14%	0%	

Municipalities located in Newfoundland and Labrador are not entitled to claim any rebate of the provincial component of GST/HST paid on purchases used in the provision of exempt water, sewerage and drainage supplies because municipalities are directly funded by the provincial government or because they pay less tax than they did before the implementation of HST.
(d)	The application of the municipal rebate is intended to maintain the equity among the consumers of these supplies regardless of the nature of the organization supplying them.
(e)	The 42.86 percent of the GST/HST on inputs which is not subject to tax remission or rebate is a component of the costs of providing these supplies and must be taken into consideration when setting the fees for their supply.
(f)	As many of the branches (reporting entities) of the federal government GST/HST registrant which provide supplies described under sections 22 and 23 of Part VI of Schedule V to the ETA do not account for the costs of making such supplies separately from the other costs of their operations, it may be difficult to claim the municipal rebate at the time the inputs are paid for, which is the normal practice. To avoid the necessity of establishing costly supplementary processes for segregating GST/HST on inputs for these exempt supplies, officials of the CCRA and the Department of Finance agreed to provide an alternative process.  
(g)	For each fiscal year, a department or agency, or any branch (reporting entity) of the federal government GST/HST registrant may choose to account for the municipal rebate for GST/HST paid on inputs used to supply water, sewerage or drainage supplies in one of two ways outlined below:  
(i)	At the time when the GST/HST is paid, charge the percentage of municipal rebate available (see chart) the Refundable Advance Account (RAA) and the balance to the chargeable appropriation; or,
(ii)	"Alternate Municipal Rebate Process" - At the time when the GST/HST is paid, charge the total GST/HST paid to the RAA. Following the procedure outlined below, an annual adjustment entry must be made.
(h)	In lieu of claiming a municipal rebate on GST/HST on inputs for provision of water, sewerage and drainage supplies, reporting entities calculate an annual equivalent to GST/HST Municipal Rebate Adjustment Amount (adjustment amount). This adjustment amount is 42.86 per cent of the estimated GST/HST incurred on inputs during the year for water, sewerage and drainage supplies
(i)	The adjustment amount will be credited to the RAA and debited to the operating accounts to which the expenses for the supplies are charged during the course of the year. The adjustment amount is the portion of the GST/HST, which must be considered as part of the cost of providing these "municipal services " when determining the fees to be charged for these supplies as referred to above.
(j)	Where the costs of these supplies are determined in whole or in part by an allocation methodology, the same allocation basis must be used to determine the adjustment amount referred to above. The calculation and any methodology used to estimate the adjustment amount would be subject to audit by the CCRA, as are all GST/HST transactions.