Forum Discussion
Inquiry Regarding GST Calculation on Bill Credits
The answer I am referring to is the one you give in this very website about the way Telus reduces the face value of bill credits by GST application.
If you're going to claim this is mandated b...
TELUS_Support
Official Support Team
Official Support TeamWhen TELUS applies bill credits to an account, they are treated as promotional incentives, not point-of-sale price reductions and under current CRA guidance, GST is applied to the full service amount before the credit is deducted. In other words, we are required to calculate tax on the pre-credit value, because the credit is not reducing the base price of the service at the time of purchase, but rather applied afterwards to the account balance.
The key distinction lies in how and when the credit is applied. According to CRA rules for telecommunications and invoicing (under the Excise Tax Act), discounts that are:
- Applied at the time of sale/invoicing = GST is applied to the reduced amount
- Applied post-sale, as a rebate or promotional credit = GST is still calculated on the original amount
You can read more in the CRA technical information bulletin B-103 regarding promotional allowances and the treatment of tax on incentives. https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/b-103.html
Promotional Incentives: Tax on the Actual Price Paid
Promotional incentives offered by a retailer, such as "buy one, get one free" (BOGO) or percentage-off discounts, are treated differently from manufacturer coupons because the retailer is not reimbursed by a third party. These are considered non-reimbursable price reductions.
Specific Requirements and GST/HST Application:
For promotional incentives, the GST/HST is calculated on the net consideration paid by the customer.
* "Buy One, Get One Free" (BOGO): The CRA considers a BOGO offer as a single supply for a single price. Therefore, GST/HST is calculated on the total amount the customer actually pays.
Example:
A store offers a "buy one, get one free" promotion on a shirt that normally sells for $30. The customer gets two shirts but only pays for one.
* Total Consideration Paid: $30.00
* HST (13% of $30.00): $3.90
* Total Paid by Customer: $33.90
* Loyalty Programs and Points: When customers redeem loyalty points for goods or services, GST/HST is generally not applied to the redemption. The rationale is that the tax was implicitly collected on the original purchases that earned the points. However, if points are purchased or if they are redeemed for cash, the tax implications can change.
