How to Claim Your GST Tax Refund

September 12, 2022 Andrew AdolphAudits

So, you want to claim your GST tax refund? I’ll show you how and if you qualify.

How to Claim a GST Refund

As a GST registrant, claiming a GST refund is very simple, but it does increase the chance of being audited. This will be covered in a bit but should not dissuade you from filing for a refund if you are entitled to it.

To claim a GST tax refund, you must apply by filling out Form GST 34. Same as a regular GST return, only this time, your input tax credits exceed the GST collected, creating a refund position.

Claiming Your GST Tax Refund

It may seem a little counter-intuitive to claim a refund of GST. After all, the whole point is to remit tax to the government. That being said, there are many reasons you, as GST registrant, find yourself in a refund position:

• You exported goods out of Canada
• You sell a mix of goods, some of which you don’t have to charge GST
• You are a builder of something in progress and incurring costs
• You are new and don’t have any sales yet
• You bought an expensive piece of equipment, and you can claim the GST up front
• You are building up inventory for the busy season

GST Refund Process

The CRA will process a GST return in about 4 weeks if you filed a paper return and 2 weeks if you filed electronically. Unless your claim is selected for review (see below).

Take it from a former CRA auditor; the government will hold any GST/HST refund or rebate you are entitled to until all outstanding returns and amounts are received. Unfortunately, the CRA can also use your GST tax refund to pay any outstanding amounts of money you owe the government.

What If My Claim Gets Selected for Review

If this is your first time claiming a refund, there is a really good chance you will receive a phone call from a CRA review agent. Most people find this nerve-wracking.

I have worked in this area of CRA in my former career and I have spent many days screening refund claims, deciding which ones to pay and which ones to assign to auditors, who we needed more of.

The purpose of the GST Refund Integrity team, as it is now called, is first to prevent paying a claim. This actually was its only purpose initially (1991). Today, it is also about collecting information that may be used in an audit of you for income tax as well as GST. I also worked as a review agent and I can tell you of all the refund claims I was assigned, about 25% of them were impossible to contact and wouldn’t respond to registered letters.

Sometimes it is claiming something you are not allowed to claim. The immediate example that jumps to mind is automobiles. While it is true that you can claim GST on your purchases, there is a special rule around automobiles that affects the ability of a sole proprietor to claim back the GST right away. This would produce a four-digit GST refund claim that would stick out and as screener I would assign it to an auditor for a slam-dunk refund adjustment.

Therefore, before filing for a refund, know why you are filing for a refund, because you may be asked.

The CRA pays refund interest according to the prescribed interest rate. Refund interest is compounded daily on an overpayment up to and including the day the overpayment is refunded, repaid, or applied. The calculation of interest you pay ends on the day the refund is paid or applied.

Do You Have to Claim a Refund Now?

No, you do not have to claim input tax credits right away. In most cases, you have a whopping four years to claim input tax credits. In fact, combing through the books and finding unclaimed input tax credits is a service we perform on a contingency fee basis.

Bottom Line

If the GST tax refund is still confusing you, I’d advise you to check out this blog on the GST Quick Method. The GST/HST quick method offers several advantages, such as less paperwork and less time calculating the net tax for GST/HST purposes. However, once your business reaches a certain size, consider reverting to the general method to secure all input tax credit entitlements.

If you have other questions about taxes and compliance? Call  604-204-6173 or email andrew@gatewaytax.ca to book a free online meeting. You can also visit the Blog for additional tax-related resources.

Andrew Adolph

Andrew Adolph is a CPA and former CRA auditor with 25 Years of experience. He helps businesses to not par any more in sales taxs than the law says they must and acts as an advocate for you if you are being audited, so you can fous on your business.