Reimbursable coupons, also known as manufacturers' coupons, are treated in the same way as cash given by the customer at the time of the transaction. Their face value is considered to include the GST and QST payable.
- are given by the retailer to a third party (for example, a coupon clearing house or the manufacturer) for redemption;
- entitle the purchaser to a specific discount (set amount) at the time of purchase; and
- apply only to taxable (excluding zero-rated) goods and services.
If a customer gives you this type of coupon at the time of a retail sale where the prices do not include the GST or QST, you must calculate the total value of all items purchased and add the GST and QST payable before deducting the value of the coupon(s) from the total amount charged. If the prices include the GST and QST, you must calculate the total first and then deduct the value of the coupon(s).
A customer purchases an item and provides a $10 coupon. You must calculate the amount that the customer must pay in one of the ways shown in the table below, depending on whether or not the taxes are included in the selling price.
|GST and QST not included in the price||GST and QST included in the price|
|Price of item||$25.00||$28.74|
|GST ($25 × 5%)||+||$1.25|
|QST ($25 × 9.975%)||+||$2.49|
|Value of coupon (GST and QST included)||−||$10.00||−||$10.00|
|Amount payable by customer||$18.74||$18.74|
On your GST return, you must account for the GST collected without taking the value of the coupon into account. The QST collected must be taken into account in the same manner on your QST return. On sending the coupon to the manufacturer for redemption, you will generally be reimbursed for the full value of the coupon (including GST and QST).
The manufacturer can claim an input tax credit (ITC) and an input tax refund (ITR) for the taxes that were reimbursed and deemed to have been included in the value of the coupon. The ITC will be equal to 5/105 of the value of the coupon, the ITR to 9.975/109.975 of its value.
Customers that are registrants and that use such coupons to make purchases for their businesses must keep in mind that the value of the coupon is subtracted after calculation of the GST and QST, thereby reducing the amount of GST and QST actually paid on the purchases. The amount claimed as an ITC must therefore be reduced by 5/105 of the value of the coupon. Similarly, the amount claimed as an ITR must be reduced by 9.975/109.975 of the value of the coupon.