Challenging a GST/HST Assessment: How to Dispute CRA’s Findings – A Complete Guide by a Montreal CPA Firm Near You

Introduction

Receiving a GST/HST assessment from CRA can be alarming—especially when it includes denied Input Tax Credits (ITCs), unexpected tax balances, or penalties. Many businesses assume CRA is correct, but GST/HST assessments are often based on incomplete documentation, auditor assumptions, or misunderstandings of place-of-supply rules. The good news: GST/HST assessments can be successfully challenged through proper evidence, legal arguments, and a well-structured appeal. This guide explains the steps to dispute a GST/HST assessment, the timelines, what documentation you need, and strategies that significantly improve your chances of success.

Legal and Regulatory Framework

GST/HST assessments are governed by the Excise Tax Act, which sets the rules for taxable supplies, exempt supplies, zero-rated sales, ITC eligibility, place-of-supply rules, and documentation requirements. To dispute an assessment, businesses must file a Notice of Objection within 90 days of the assessment date. CRA Appeals must independently review the case. If CRA confirms the assessment, the next step is an appeal to the Tax Court of Canada, which has full authority to overturn GST/HST reassessments.

Key Court Decisions

In Precision Gutters v. Canada, the Tax Court upheld CRA’s denial of ITCs due to missing or incomplete invoices—highlighting strict documentation standards. In Rona Inc. v. Canada, CRA’s assumptions were rejected because the taxpayer provided strong evidence. In Guyoil v. Canada, the court confirmed that CRA cannot arbitrarily deny ITCs when documentation is valid. These cases show that outcomes depend heavily on the quality of evidence.

Common Reasons CRA Issues GST/HST Assessments

CRA may reassess a business due to: missing invoices, supplier invoices without GST/HST numbers, improper ITC claims, personal expenses claimed as business costs, discrepancies between sales records and GST/HST returns, incorrect place-of-supply rules, e-commerce platform mismatches (Shopify, PayPal, Stripe), cash transactions not recorded, subcontractor invoices lacking required details, or issues with GST on real estate transactions or assignment sales.

How to Challenge a GST/HST Assessment

1. Read the Explanation of Changes Carefully

CRA will outline why ITCs were denied, why tax was added, or why penalties were applied.

2. Gather All Supporting Documentation

Collect invoices, receipts, proof of payment, contracts, bank statements, merchant processor summaries, inventory records, and accounting reports. CRA requires complete documentation to consider reversing an assessment.

3. Identify Auditor Errors

Common auditor errors include: misinterpreting documents, treating internal transfers as sales, ignoring ITCs for lack of minor invoice details, applying incorrect GST/HST rates, failing to recognize zero-rated supplies, using flawed markup tests, or double-counting deposits.

4. File a Strong Notice of Objection (Within 90 Days)

Your objection should include: a list of disputed items, explanations of auditor errors, ITC documentation, legal arguments, and case law references. A well-structured objection is critical.

5. Provide Additional Evidence During Appeals Review

CRA Appeals often accepts evidence the auditor ignored. This is your chance to fix missing paperwork and provide a full explanation.

6. Negotiate a Reasonable Settlement

Appeals may agree to partial acceptance of ITCs, removal of penalties, or reduction of GST/HST owing.

7. Appeal to the Tax Court of Canada (If Necessary)

If CRA still gets it wrong, Tax Court provides an impartial ruling. Many GST/HST objections succeed there due to CRA’s aggressive assumptions.

Documents CRA Expects During an Appeal

• Supplier invoices with GST/HST numbers

• Detailed receipts

• Proof of payment (bank or credit card statements)

• Contracts or agreements

• Subcontractor documentation

• E-commerce sales summaries

• Accounting ledgers and trial balances

• Real estate purchase/sale documents

• Vehicle logs (if ITCs relate to vehicles)

• Explanation letters clarifying ambiguous transactions
  Missing documentation is the number one reason CRA confirms assessments.

How to Strengthen Your GST/HST Dispute

Ensure invoices include all mandatory details.
Prepare reconciliation summaries for ITCs and sales.
Separate business vs personal expenses clearly.
Reconstruct missing records before submitting.
Use tax jurisprudence to support your interpretation.
Provide timelines showing business purpose and usage.

When to Consider the Voluntary Disclosures Program (VDP)

If you underreported GST/HST or missed filings—and CRA has not contacted you—VDP may eliminate penalties and reduce interest. If CRA already assessed you, VDP is no longer available for those periods.

Consequences of Not Challenging an Incorrect Assessment

You may face: incorrect GST balances, unnecessary penalties, daily compounded interest, bank freezes, wage garnishment, client RTPs, director’s liability exposure, and lost ability to deduct legitimate ITCs. Doing nothing is financially dangerous.

Mackisen Strategy

At Mackisen CPA Montreal, we challenge GST/HST assessments with detailed audit rebuttals, reconstructed ITC documentation, case law arguments, e-commerce reconciliation, objection submissions, and negotiation with CRA Appeals. We protect businesses from unfair tax liabilities and ensure CRA follows the law—not assumptions.

Real Client Experience

A Montreal contractor overturned a $52,000 GST reassessment after we restored missing ITCs. An e-commerce seller reversed 14 months of GST/HST penalties after reconciling Shopify and PayPal data. A real estate investor won an appeal after proving GST was not applicable to a property sale. A consultant avoided gross negligence penalties after we corrected misinterpreted expenses.

Common Questions

Can CRA deny ITCs for minor invoice errors? Yes—but they often reverse upon appeal. Does an objection stop GST collections? No—only income-tax collections pause. Should I dispute GST/HST reassessments quickly? Yes—due to fast interest accumulation. Do I need a CPA? Strongly recommended for GST/HST disputes.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal prepares strong, evidence-driven GST/HST disputes that challenge CRA assumptions and protect your business’s financial integrity.