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
Manufacturer Coupons: A Reduction in Tax Payable for the Consumer
A key characteristic of a manufacturer's coupon is that it is a reimbursable coupon. This means the retailer who accepts the coupon from a customer is entitled to be reimbursed for the coupon's value by the manufacturer or another third party.
Specific Requirements and GST/HST Application:
Under Section 181 of the Excise Tax Act, when a retailer accepts a reimbursable coupon for a taxable supply (other than a zero-rated supply), the GST/HST is calculated on the full price of the item before the coupon is applied. The coupon is then treated as a partial payment towards the total, inclusive of tax.
Example:
A customer in Ontario (where the HST rate is 13%) purchases a product for $20.00 and presents a $2.00 manufacturer's coupon.
* Selling Price: $20.00
* HST (13% of $20.00): $2.60
* Total Payable: $22.60
* Less Manufacturer's Coupon: -$2.00
* Amount Paid by Customer: $20.60
In this scenario, the retailer collects $2.60 in HST from the customer and the coupon. The retailer can then claim an input tax credit (ITC) for the tax fraction of the coupon value they were reimbursed by the manufacturer. The "tax fraction" is calculated as the HST rate divided by (100% + the HST rate). In this case, it would be 13/113 of the $2.00 coupon value.
