Paying GST and QST on Property in Your Possession at the Time of Cancellation
If you cease to be a GST and QST registrant, you are considered to have sold all the property intended for consumption, use or supply in the course of commercial activities that was in your possession at the time of cancellation. However, different rules apply in the case of 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 cancellation of registration and to have sold the property and collected the GST and QST. You must calculate the taxes for each property as follows:
- Determine the GST and the QST that were paid on the property the last time it was acquired or imported.
- Add the GST and the QST that were paid on improvements made to the property.
- Where applicable, deduct any amounts (excluding ITCs or ITRs) recovered through a refund or rebate or in any other way.
- Multiply the result of the preceding operations by the result of the following calculation: the fair market value (FMV) of the property, divided by the consideration paid at the time of its acquisition plus the consideration paid for any improvements. (Note that this fraction cannot be greater than 1.)
In December 2013, John Quachegan, a GST and QST registrant, bought office furniture at a cost of $5,000, plus $250 GST and $498.75 QST. As the furniture was to be used for commercial activities, John was able to claim an ITC and an ITR on the taxes paid.
On September 30, 2014, John cancelled his registration. John still owns the furniture and is therefore considered to have sold the furniture and collected the taxes immediately before cancelling his registration. On that date, the furniture's FMV was $2,500.
|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|
|Refunds or rebates already received||–||$0.00||–||$0.00|
|FMV ÷ Consideration for property and 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 FMV immediately before cancellation of your registration and to have collected the GST and QST calculated on the FMV.
Cheryl MacDonald ceased to be a GST and QST registrant on April 30, 2014, and had an inventory of unsold computers with an FMV of $8,000. Cheryl must include the GST and QST calculated on the FMV in the net tax payable for her 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 an ITC and an ITR solely for the period during which you were a registrant.
On April 15, 2014, Eli Fletcher received an invoice for advertising services covering the period from April 15 through May 14, 2014. The cost of these services was $170, to which $8.50 GST and $16.96 QST were added. Eli claimed an ITC and an ITR on the taxes paid.
On May 1, 2014, Eli ceased to be a GST and QST registrant. Consequently, he must add, to his net tax payable, the ITC and the ITR claimed for the portion of the advertising services attributable to the period after he cancelled his registration. The amount of the GST payable is $3.97 ($8.50 × 14/30). The amount of the QST payable is $7.91 ($16.96 × 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.