GST/HST reviews and audits: what the CRA checks

Why did the CRA hold my GST/HST refund or contact me after filing?

The CRA screens GST/HST refund requests before payment and may ask for an explanation or documents. A hold does not, by itself, mean an audit or a denied refund. The CRA also reviews returns after assessment, including mismatches between reported sales and tax collected or between GST/HST sales and income-tax business revenue. CRA: GST/HST audit and examination; CRA: Post Assessing Review

Read the letter for the reporting periods, amounts, documents and reply date. If contact came by phone, check the notice in your CRA account or confirm the caller through a published CRA number before sending records. The CRA says a post-assessment reviewer may ask about zero-rated or exempt sales, sales outside your province or country, and differences between return lines. Give a short explanation tied to the figures and the records requested. Use the submission method and case number in the letter; if it offers Submit documents online, save the confirmation number. CRA: Post Assessing Review

Is this a return review, a trust account examination or an audit?

A trust account examination checks GST/HST charged, reported and sent to the government; “trust” refers to tax held for the government. A return review checks specific reported amounts, while an audit examines books and source records more fully. The notice and request identify the process; a post-assessment review is not an audit. CRA: Trust accounts examinations; CRA: Post Assessing Review

The CRA selects GST/HST audits or examinations using risk assessment and random selection. A trust account examination can lead to an audit if issues need a closer look. Do not infer from a letter about GST/HST that the CRA is also auditing income tax. CRA: GST/HST audit and examination; CRA: What to expect during a GST/HST trust accounts examination

What records tie sales, tax collected and input tax credits to my returns?

Prepare a bridge from each GST/HST return to the detailed transactions behind it. The CRA requires records detailed enough to determine tax collected and amounts refunded, rebated or deducted; it may examine ledgers, invoices, contracts, rental records and bank statements. CRA: GST/HST and payroll records; CRA: What you should know about audits

Show reconciling items instead of forcing totals to match: timing differences, credit notes, exempt sales, exports and non-sales deposits can explain a gap. If the CRA asks about two periods, build a separate bridge for each and identify credits from earlier periods. The CRA's post-assessment review specifically compares sales, tax collected and input tax credits, and can compare GST/HST revenue with income-tax business revenue. CRA: Post Assessing Review

What if I am missing invoices or receipts for input tax credits?

Ask the supplier for a replacement copy and gather the contract, transaction record and other supplier-issued documents. Tell the examiner whether you had the original or other sufficient evidence before filing. A replacement can help prove what you already had; if the required evidence was first obtained after filing, the copy alone does not establish that the original claim met the timing rule. A bank payment helps trace a transaction but does not by itself establish the credit. Excise Tax Act, section 169(4)–(5); CRA: What you should know about audits

Match each disputed credit to the registrant who incurred the expense, the GST/HST paid or payable, and the purchase's use in commercial activity. If a purchase served both taxable and exempt or personal activity, show the allocation rather than claim the whole tax. The CRA says purchase invoices or receipts must be kept for ITCs; the supplier's registration number and other required details depend on the transaction. See Filing GST/HST and claiming input tax credits for the receipt fields and claim window. CRA: GST/HST and payroll records; CRA: Input tax credits

If the supplier cannot provide the missing details, tell the examiner exactly what is missing and provide the records you do have. Do not make an invoice yourself. Section 169 permits the Minister to exempt a registrant from a documentation requirement when sufficient records establish the supply and tax, but that is a discretionary exception, not an automatic right. Excise Tax Act, section 169(5)

If you first obtain sufficient evidence after filing, an unsupported credit may still be claimed on a later return under section 225(3)–(4). If it was already claimed, the later claim has correction conditions and must not be duplicated. The usual claim window is four years from the original reporting period; for specified persons it is generally two years from the fiscal year containing that period. See Filing GST/HST and claiming input tax credits for the exact filing cutoff and exceptions. Excise Tax Act, section 225

How do I support zero-rated exports or supplies made outside Canada?

First identify whether you sold goods, services or intangible property; an overseas customer or address alone does not prove zero-rating. Match the invoice to the applicable export condition and keep evidence of both the transaction and the facts that condition requires. CRA: GST/HST on imports and exports

For goods, the CRA lists matched sales and transport documents as possible export evidence and says a mail or courier receipt can support goods sent outside Canada. If the buyer took delivery in Canada, extra conditions apply, including prompt export and evidence that the buyer actually exported the goods. For services, certain supplies to non-residents can be zero-rated, but the CRA lists exceptions. A contract and a foreign billing address should be tested against the actual supply. CRA: Exports - Tangible Personal Property; CRA: GST/HST on imports and exports; CRA: Exports - Determining Residence Status

What should I send for a new residential rental property rebate review?

Send the documents named in the CRA request, along with a short index connecting each document to the application and property. For a purchaser-landlord using application type 6, the CRA lists the statement of adjustments, signed purchase and sale agreement, and rental or lease agreement. A builder-landlord's listed documents differ, so check the application type in Part C of Form GST524 before responding. CRA: New residential rental property rebate

Keep the filed Form GST524 and any provincial schedule, closing and tax records, and the lease that shows the residential use claimed. If a qualifying unit outside a multiple-unit complex was sold within one year after first occupancy, include the sale records: repayment may apply depending on the buyer's intended use. Excise Tax Act, section 256.2(10) If the CRA requests more information or proposes denial, identify the missing document, calculation or eligibility fact and respond to that issue. If a notice has already denied the rebate, new records may support reassessment after a review; a denial after an audit assessment requires an objection for the CRA to review the claim. Check the notice's deadline and the CRA's GST/HST objection decision tool, then see CRA reviews, audits and voluntary disclosure for dispute steps. See GST/HST on residential property for who qualifies; a long-term residential landlord generally cannot replace a denied rebate with an input tax credit on the purchase. CRA: New residential rental property rebate

How far back can the CRA reassess GST/HST, and how long must I keep records?

For an ordinary GST/HST net-tax period, the general assessment limit is four years after the later of the return due date and the day it was filed. For a rebate already paid or applied, the general reassessment limit is four years after the rebate application was filed; an initial rebate assessment can be made at any time. These are separate clocks, and section 298 contains exceptions. Excise Tax Act, section 298

The CRA can assess a matter at any time where there was a misrepresentation attributable to neglect, carelessness or wilful default, fraud, or an effective waiver. Some specific GST/HST assessments have different periods. If a reviewer asks about an older period, check the actual filing and assessment dates and the legal basis before assuming it is closed. Excise Tax Act, section 298

The registrant owes its GST/HST balance: a sole proprietor owes it personally, and a general partner or other non-limited partner can owe a partnership's amounts arising during membership under section 272.1(5). A corporate director can owe unremitted net tax, interest and penalties under section 323, subject to statutory collection conditions and a due-diligence defence; the CRA must assess within two years after the person last ceased to be a director. A spouse, minor child or other non-arm's-length recipient of a debtor's property for less than fair value may also owe under section 325, up to the lesser of the value shortfall and relevant GST/HST debt; assessment can occur at any time. A representative, including an executor, who distributes a registrant's assets without the required clearance certificate can owe up to the value distributed under section 270.

Usually, keep GST/HST records for 6 years from the end of the last tax year to which they relate. Keep records of long-term property acquisitions and disposals, and historical business records affecting a later sale or wind-up, indefinitely. CRA directions, unfiled returns and unresolved objections or appeals can extend other retention periods. The retention rule is separate from the reassessment limit. Keep working copies of electronically filed returns and get written CRA permission before destroying records early. CRA: GST/HST records to keep; CRA: Where to keep records and for how long

What happens if the CRA proposes to deny credits or reassess tax?

An audit proposal letter explains proposed changes. The CRA gives you 30 days to agree or disagree; check the letter's reply date and the disputed amounts. For response steps and objections after assessment, see CRA reviews, audits and voluntary disclosure. Send audit records through the secure method the auditor provides; CRA auditors cannot receive records by email. CRA: What you should know about audits

A knowing or grossly negligent false statement can also trigger the section 285 penalty: the greater of $250 and 25% of the statutory tax or rebate difference. Check the stated basis if the proposal includes a penalty. Excise Tax Act, section 285

An audit can close without change or end in a notice of assessment or reassessment showing more tax owing or a refund. A post-assessment review may instead end with no change, guidance or a return adjustment. Save the proposal, your response and the final notice together. If you dispute an assessment, file a GST/HST objection within 90 days after the notice is sent, using Form GST159 or the CRA's online service. If late, apply for an extension within one year after that deadline; relief has conditions. See CRA reviews, audits and voluntary disclosure for dispute steps and CRA penalties, interest and relief for assessed charges. Excise Tax Act, sections 301 and 303; CRA: What you should know about audits

Example

Illustrative Canadian-dollar figures only. A business reports C$100,000 in sales, C$10,000 in GST/HST collected or collectible and C$7,000 in input tax credits for one reporting period, leaving C$3,000 of net tax. The CRA asks why the credit is high.

The owner sends a one-page reconciliation: the sales ledger totals C$100,000; its tax column totals C$10,000; the purchase ledger's GST/HST column totals C$7,000. Each purchase row points to a supplier document and states how the purchase was used. One C$1,000 credit lacks a supplier invoice, so the owner requests a copy and flags that row as unverified. If the owner cannot establish the tax and other required details, that C$1,000 remains at risk and net tax would rise to C$4,000; the bank payment does not fill the gap. CRA: GST/HST and payroll records; Excise Tax Act, section 169

Different for you?

• You need the exact receipt fields or claim deadline: see Filing GST/HST and claiming input tax credits.
• Your rental rebate depends on the property's use or ownership: see GST/HST on residential property.
• The CRA issued a disputed assessment or you have missing years: see CRA reviews, audits and voluntary disclosure.
• The reassessment includes interest or penalties: see CRA penalties, interest and relief.
• You charged the wrong provincial GST/HST rate: see Fixing the wrong GST/HST rate.
• Your records span several periods or large credits may be denied: get bookkeeping help to reconcile the source documents to each filed return.
• Your business is registered in Québec: Revenu Québec generally handles GST/HST and QST returns, audits and objections there. For a GST/HST objection, use its online service or Form FP-159-V; a QST objection uses Form MR-93.1.1-V. Revenu Québec counts the objection period from the notice date. The CRA handles selected listed financial institutions; follow the agency named on the notice. Revenu Québec: Reporting GST/HST and QST; Revenu Québec: How to file an objection; CRA: Listed financial institutions