In AOK Payday Loans Inc. v The Queen,1 the
taxpayer, AOK, tried to do an end-run around the GST rebate
provisions that limit recovery of GST paid in error to two years.
In an earlier Tax Court appeal by AOK, the Court agreed with the
Canada Revenue Agency (the "CRA") that
AOK was beyond the two-year period within which to claim a rebate
of $90,200 for GST remitted in error to CRA. Thus, the Tax Court
upheld the CRA's assessment to deny this GST rebate claim (the
AOK then claimed input tax credits
("ITCs") on its November 2010 GST return
to recover the $90,200 GST remitted in error. CRA raised an
assessment to deny the ITCs (the "Second
Assessment"). AOK appealed the Second Assessment to
the Tax Court, which agreed that there was no basis for the ITC
claims. In the alternative, AOK sought to recover the GST remitted
in error through the application of subsections 296(2.1), (3.1) and
(4.1) of the Excise Tax Act (the
These provisions establish a detailed code for when an
unclaimed GST rebate of a person should
be credited or refunded by CRA to a person as a result of the
CRA's assessment of net tax or another overdue amount against
that person. As AOK had already (unsuccessfully) claimed the GST
rebate (the subject of the First Assessment and earlier Tax Court
appeal),3 AOK failed to satisfy one of the conditions in
these provisions. Therefore, the Tax Court did not allow a credit
or refund for the amount of the previously
claimed GST rebate (i.e., this claim could not be
resurrected by the Second Assessment).
This finding was sufficient to dispose of AOK's appeal. The Tax
Court, however, went on to consider whether AOK's appeal of the
Second Assessment would have been allowed had AOK not
previously filed a GST rebate application. As no net tax was owing
by AOK for the November 2010 reporting period, the GST rebate could
not have been credited in the reporting period.4 There
was no other tax amount in default against which to offset the GST
rebate5, leaving a refund amount. Such a refund
claim6 would be subject to the strict two-year rebate
claim period calculated from the date of the Second Assessment
(which could not be met).7
This case is instructive in at least three respects. Firstly,
despite what the Tax Court acknowledged was an unfair result in
this case (in fact, recommending that AOK apply under the
Financial Administration Act to the federal government for
remission of the GST remitted in error), limitation periods for ITC
and rebate claims will be strictly enforced against taxpayers.
Secondly, should a taxpayer be assessed, then the taxpayer should
consider whether there is any opportunity to receive a credit or
refund for any unclaimed ITC or any other deduction from net tax,
or for any GST/HST rebate. Thirdly, provisions in section 296 of
the ETA set out a strict hierarchical code of conditions to be met
to allow such a credit or refund.
12013 TCC 217.
2 2010 TCC 469.
3 ETA, paragraph 296(2.1)(b).
4 Pursuant to subsection 296(2.1) of the ETA.
5 Under paragraphs 296(3.1)(a) and (b) of the ETA.
6 Under paragraph 296(3.1)(c) of the ETA.
7 Under paragraph 296(4.1)(b) of the ETA.
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).