Rebates That Are Part of the Sales Transaction – Manufacturers' Rebates
Some manufacturers' rebates are granted to customers through the retailer at the time the property is purchased, in which case the amount of the rebate is applied to the retail price of the property.
As a retailer, you must collect GST and QST on the retail price before deducting the amount of the rebate.
A dealership sells an automobile for $20,000. The dealer informs the customer (who is not a GST or QST registrant) that the manufacturer is providing a $500 rebate on the automobile.
| Calculation | Amount | |
|---|---|---|
| Amount payable by the customer | = | $22,495 |
| Selling price | $20,000 | |
| GST ($20,000 × 5%) | + | $1,000 |
| QST ($20,000 × 9.975%) | + | $1,995 |
| Subtotal | = | $22,995 |
| Rebate | – | $500 |
The customer must pay $20,500 ($22,495 − $1,995) to the dealership and $1,995 to the Société de l'assurance automobile du Québec.
Manufacturers that grant a rebate are entitled to an input tax credit (ITC) equal to 5/105 of the value of the rebate for the period during which the rebate was granted. They are also entitled to an input tax refund (ITR) equal to 9.975/109.975 of the value of the rebate. Special rules apply if the customer is a registrant entitled to an ITC or an ITR or to a GST or QST rebate.