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
Rebates: The Timing of the Tax Adjustment is Key
Rebates, which can be offered by either the manufacturer or the retailer, represent a refund to the customer after the initial purchase. The GST/HST treatment depends on whether the rebate is provided at the point of sale (instant rebate) or after the fact (mail-in rebate).
Specific Requirements and GST/HST Application:
* Instant Rebates: When a rebate is provided at the time of purchase, it is treated as a reduction in the price before calculating the GST/HST, similar to a retailer's promotional incentive.
* Mail-in Rebates and Section 181.1: For mail-in rebates, particularly those from a manufacturer, the initial sale is treated as being for the full price, and GST/HST is collected on that amount. The subsequent rebate is governed by Section 181.1 of the Excise Tax Act.
This section allows a registrant (e.g., a manufacturer) who pays a rebate to a customer to claim an input tax credit for the "tax fraction" of the rebate amount, provided they give the customer written notice that the rebate includes the GST/HST.
Example:
A customer buys a taxable item for $100 plus 13% HST, paying a total of $113. The manufacturer offers a $10 mail-in rebate.
* Initial Sale: The customer pays $113 to the retailer. The retailer remits the $13 HST to the government.
* Rebate: The customer mails in the rebate form and receives $10 from the manufacturer. If the manufacturer provides written notice that the rebate is tax-inclusive, they can claim an ITC for the tax portion of that rebate (13/113 of $10). The customer, if a GST/HST registrant who claimed an ITC on the initial purchase, may have to make an adjustment to their net tax.
