The Disappearing GST Input Tax Credit

What happens when a supplier charges you GST and gives you his GST number?  In most cases you are allowed to claim the GST paid as an input tax credit (ITC) on your GST return.

In one case, however, the Tax Court of Canada disallowed the ITC because a supplier's GST number was de-registered.  Although the taxpayer accepted the supplier's GST number in good faith, the Court found that when a registration number is false the taxpayer is considered not to have obtained a GST number at all from the supplier.

This is an unusual ruling since the supplier will have to pay CRA for the GST collected but the purchaser will not be able to claim the corresponding ITC.  If you are unsure of any of your suppliers, or if the invoiced amount represents a particularly large ITC, you can verify a supplier's GST status by contacting CRA at 1-800-959-5525.  But watch for this ruling to be challenged by other GST registrants in the higher courts.