Invoices (GST 300-6-3)

Notice to the reader:

Please note that the following GST Memorandum, although correct at the time of issue, has not been updated to reflect any subsequent legislative changes since the date of issue. As a result, some of the technical information this memorandum contains may no longer be valid. Please contact your GST/HST Rulings Centre for assistance.

GST memoranda 300-6-3

TAX ON SUPPLIES
TIME OF LIABILITY
Ottawa, March 20, 1991
INVOICES

This memorandum in the TIME OF LIABILITY sub-series explains what an invoice is for purposes of the timing of liability for payment of the Goods and Services Tax (GST).

LEGISLATIVE REFERENCES

Excise Tax Act sections 123, 133, 138, 152, 168 and 223, subsections 153(2), 169(1) and 169(3)

DEFINITIONS

The following definitions have either been taken from the Excise Tax Act (as amended by S.C. 1990, c.45 (Bill C-62) or represent National Revenue, Customs and Excise interpretations of terms relevant to the administration of that Act.

"Act" means the Excise Tax Act;

"consideration" may be money, a thing, a service, forbearance in the exercise of a right or anything else which induces the supplier to make the supply. Where consideration is monetary the amount of the money will be used to calculate the tax. Where the consideration is non-monetary, the fair market value of the consideration at the time the supply was made will be used to calculate the tax;

"invoice" includes a statement of account, a bill and any other similar record, regardless of its form or characteristics, and a cash register slip or receipt;

"person" means an individual, partnership, corporation, trust or estate, or a body that is a society, union, club, association, commission or other organization of any kind;

"property" means any property, whether real or personal, movable or immovable, tangible or intangible, corporeal or incorporeal, and includes a right or interest of any kind, a share and a chose in action, but does not include money;

"recipient", in respect of a supply, means the person who pays or agrees to pay consideration for the supply or, if no consideration is or is to be paid for the supply, the person to whom the supply is made; "registrant" means a person who is registered, or who is required to apply to be registered, under sections 240 and 241 of the Excise Tax Act;

"sale", in respect of property, includes any transfer of the ownership of the property and a transfer of the possession of the property under an agreement to transfer ownership of the property;

"service" means anything other than

(a) property,

(b) money, and

(c) anything that is supplied to an employer by a person who is or agrees to become an officer or employee of the employer in the course of or in relation to the office or employment of that person;

"supply" means, subject to sections 133 and 134 of the Act, the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, rental, lease, gift or disposition;

"tax" means the Goods and Services Tax payable under Part IX of the Excise Tax Act;

"taxable supply" means a supply that is made in the course of a commercial activity, but does not include an exempt supply.

GENERAL

General Rule

1. The general timing of liability rule, under subsection 168(1) of the Act, is that tax is payable by the recipient of a taxable supply on the earlier of the day the consideration for the supply is paid and the day that consideration for the supply becomes due. Tax is generally collectible by the supplier at the same time that it is payable by the recipient.

2. Registrants are required to account for any tax collectible on the return for the reporting period during which the tax became collectible, whether or not it is actually collected.

Partial Payment

3. When consideration for a taxable supply is paid or becomes due on more than one day, subsection 168(2) of the Act provides that the tax will be payable by the recipient on the earlier of the day a partial payment is made and the day a partial payment becomes due. The tax payable will be calculated only on the value of the partial payment.

Consideration Becomes Due

4. Under subsection 152(1) of the Act, consideration, or a part thereof, for a taxable supply, is deemed to become due on the earliest of the following days:

a) the day the supplier first issues an invoice in respect of the supply for that consideration or part;

b) the date of that invoice;

c) the day the supplier would have, but for an undue delay, issued an invoice in respect of the supply for that consideration or part; and

d) the day the recipient is required to pay that consideration or part to the supplier pursuant to an agreement in writing.

5. When a taxable supply of property is made by way of lease, licence or similar arrangement under an agreement in writing, subsection 152(2) provides that, notwithstanding subsection 152(1) of the Act, consideration, or any part thereof, becomes due on the day the recipient is required to pay the consideration, or a part, pursuant to the agreement. The issuance of an invoice in these situations will not cause consideration to become due. For example, if payments are required on specific dates under a written agreement and invoices are issued in advance of those dates, the written agreement will determine the time of liability for tax. However, if payment is made before the date required under the agreement, tax will be payable on that earlier date.

INVOICES

6. An invoice is a document which either notifies a recipient of the obligation to pay or records payment.

7. An invoice may give the terms of payment. The invoice may itemize or describe the goods or services being supplied and state the consideration due or paid for the supply.

8. Tax will be calculated on the face value of the invoice in accordance with subsection 152(1) of the Act as outlined in paragraph 4 of this memorandum.

9. Generally, an invoice is issued after, or as a record of, an agreement to make a supply or when the supply is made. Where there is an agreement to make a supply, section 133 of the Act considers a supply to exist and the further provision of property or services under the agreement is considered part of the original supply.

10. When a written agreement (other than a supply by way of lease, licence or similar arrangement) to provide a property or service states that the recipient is required to pay consideration, or any part, on specified dates and an invoice is also issued, subsection 152(1) of the Act (as outlined in paragraph 4 of this memorandum) determines when the tax is payable. If an invoice is issued or dated prior to the date payment is required, pursuant to subsection 152(1), the consideration is deemed to become due on the earliest of the invoice date and the day the invoice was issued. If an invoice is issued or dated subsequent to the payment date stipulated in the agreement, under subsection 152(1), the consideration is deemed to become due on the date specified in the agreement which, in turn, is the date tax is payable based on subsection 168(1) of the Act (as outlined in paragraph 1 of this memorandum).

DOCUMENTS THAT ARE NOT INVOICES

11. An estimate which carries no obligation to pay is not regarded as an invoice. For example, an estimate for car repairs is not an invoice because there is no supply of the work, no agreement to make a supply and no obligation to pay the estimated amount.

12. A notice offering the opportunity to purchase an item at a specified price is not considered to be an invoice, but an offer which the recipient may accept or reject. In such cases, the recipient has no underlying obligation to pay. For example, a magazine subscription renewal notice sent to a subscriber will not generally be considered to be an invoice. If a subscriber renews the subscription and makes payment at that time, tax is also payable. The subscriber may sign the notice accepting the renewal offer. The notice then becomes a written agreement and may give a payment due date. Tax will be payable as of that date. Alternatively, the subscriber may be able to check a "bill-me-later" box on the renewal notice. The subsequent bill is an invoice, and tax is payable under subsection 152(1) of the Act, as outlined in paragraph 4 of this memorandum.

13. A packing slip accompanying items shipped usually lists the quantity of goods shipped, but not the consideration payable for these goods. Presumably, in this case, there is an underlying agreement between the supplier and the recipient that the recipient will pay for the goods shipped. Such a packing slip, in and of itself, does not require the recipient to pay. In general, neither mere packing slips nor bills of lading will be considered invoices for GST purposes. Bills of lading are documents signed by a carrier or the carrier's agent which describe the freight, the terms of contract for the carriage and the consignee of the property.

14. In many transactions, one party sends the other a document as a reminder of the amount to be paid, but the reminder notice does not require payment and does not trigger the GST's timing provisions when the notice is sent. This would be true, for example, when there is a contract for the ongoing supply of taxable property and payment will be due under the terms of the contract. If the supplier sends a notice reminding the recipient that payment will be due on a certain date, according to the contract, the notice (appropriately identified as such) would not be considered to be an invoice.

VERIFICATION

15. In general, invoices are the primary trail for verifying tax paid or due on supplies of property and services. Registrants are required by subsection 223(1) to provide sufficient information on their invoices or other supporting documents so that customers will know they have satisfied their tax liability on supplies. This information can be provided on invoices, receipts and agreements in writing. In addition, for the purposes of claiming input tax credits or rebates, the supplier of taxable supplies must, on request, provide recipients with specified information pursuant to subsection 223(2) of the Act. More information on these requirements is available in GST MEMORANDUM 400-1-2, "DOCUMENTARY REQUIREMENTS".

16. Generally, suppliers will use invoices as a primary document in their record keeping to support the collection and remittance of tax. More information on record keeping is available in GST MEMORANDUM 500-1, "BOOKS AND RECORDS", and GST MEMORANDUM 500-1-2, "COMPUTERIZED RECORDS".

NOTE: This memorandum is not a legal document. It contains general information and is provided for convenience and guidance in applying the Excise Tax Act and Regulations. If interpretation problems occur, please refer to the legislation or contact the nearest Revenue Canada Excise office.

REFERENCES

OFFICE OF RESPONSIBILITY:

Policy and Legislation

LEGISLATIVE REFERENCES:

Excise Tax Act

HEADQUARTERS FILE:

N/A

SUPERSEDES GST MEMORANDUM:

N/A

OTHER REFERENCES:

N/A

SERVICES PROVIDED BY THE DEPARTMENT ARE AVAILABLE IN BOTH OFFICIAL LANGUAGES.

THIS MEMORANDUM IS ISSUED BY TECHNICAL INFORMATION, EXCISE BRANCH UNDER THE AUTHORITY OF THE DEPUTY MINISTER OF NATIONAL REVENUE, CUSTOMS AND EXCISE.

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