GST/HST rebate for tax paid in error (s. 261)

Section 261(1) of the Excise Tax Act applies where a person has paid an amount as or on account of tax, net tax, penalty, interest or another obligation in circumstances where the amount was not payable or remittable by that person. A buyer can meet it when GST/HST appears on a closing statement or supplier invoice and later turns out not to have been owing. The Minister pays it subject to subsections 261(2) to (3). For the wider checks, see how to check HST compliance when buying a business.

Limits on the claim

Under section 261(3), no rebate is paid unless the person files an application within two years after the day the amount was paid or remitted. Section 261(2) also restricts the rebate, including to the extent the amount was taken into account as tax or net tax for a reporting period and the Minister has assessed the person for that period under section 296. The CRA’s rebate application guide files this claim under reason code 1C. It says that if the supplier gives you a refund or credit, you are no longer eligible for a rebate, and that you can apply if you cannot get one from the supplier.

What to ask

• Whether the supplier can refund or credit the amount first
• The date the amount was paid, so the two-year window can be tracked
• Whether the amount was already assessed for a reporting period
• Whether the seller or the buyer carries the claim under the purchase agreement