Paying GST and QST on Property in Your Possession at the Time of Cancellation
If you cease to be a registrant, you are considered to have sold all property intended for consumption, use or supply in the course of commercial activities. However, different rules apply to capital property, non-capital property, and services and rental property.
You are deemed to have ceased to use your capital property in the course of your commercial activities immediately before cancelling your registration and to have sold the property and collected the GST and QST. As a rule, the taxes are equal to the basic tax content of the property at the time of the change in use.
In September 2015, a GST and QST registrant bought office furniture at a cost of $5,000, plus $250 GST and $498.75 QST. Since the furniture is for use in commercial activities, the person was able to claim an input tax credit (ITC) and an input tax refund (ITR) for the taxes paid.
On June 30, 2017, the person cancelled its registration. The person still owns the furniture and is therefore considered to have sold it and collected the taxes immediately before cancelling the registration. On that date, the furniture's fair market value (FMV) was $2,500 for both GST and QST purposes.
|Calculation of taxes to be remitted||GST||QST|
|Taxes paid at time of acquisition||$250.00||$498.75|
|Taxes paid on improvements||+||$0.00||+||$0.00|
|Refund or rebate||–||$0.00||–||$0.00|
|FMV / Total acquisition cost of property and cost of improvements:
$2,500/($5,000 + $0.00)
|Taxes to be remitted||$125.00||$249.38|
You are deemed to have sold all your non-capital property for a price equal to its fair market value (FMV) immediately before you ceased to be a registrant and to have collected the GST and QST calculated on the FMV.fair market value (FMV) immediately before you ceased to be a registrant and to have collected the GST and QST calculated on the FMV.
A person ceased to be a GST and QST registrant on April 30, 2017, and had an inventory of unsold computers with an FMV of $8,000 for both GST and QST purposes.
GST and QST calculated on the FMV must be included in the net tax payable for the person's last reporting period as a registrant. The amount of the GST payable is $400 ($8,000 × 5%). The amount of the QST payable is $798 ($8,000 × 9.975%).
Where a service is being rendered or property is being leased over a period that extends beyond the date when you cease to be a registrant, you are entitled to input tax credit (ITC) and an input tax refund (ITR) solely for the period during which you were a registrant. The amount of the taxes must be prorated.
On April 15, 2017, a person received an invoice for advertising services covering the period from April 15 through May 14, 2017. The cost of these services was $500, including $25 GST and $49.88 QST. An ITC and an ITR were claimed for the taxes paid.
On May 1, 2017, the person ceased to be a registrant. The person has to add, to the net tax payable, the ITC and the ITR claimed for the portion of the advertising services attributable to the period after registration was cancelled. The amount of the GST payable is $11.67 ($25 × 14/30). The amount of the QST payable is $23.28 ($49.88 × 14/30).
If goods and services covered by the ITR restrictions for large businesses are acquired between December 31, 2017, and January 1, 2021, the QST to remit must be adjusted to take into account the year of acquisition. For example, the QST to remit for property acquired in 2018, which gives entitlement to a 25% ITR, is equal to 25% of the QST calculated on the FMV or the basic tax content.