CRA GST Audit — Montreal CPA Firm Near You: Defending Your Goods and Services Tax Compliance

A CRA GST Audit is conducted to review your business’s GST/HST filings and ensure that tax credits, sales taxes, and business-related deductions are correctly reported. This audit focuses on verifying that GST has been properly collected and remitted and that input tax credits (ITCs) for eligible purchases are correctly claimed. If discrepancies arise between your GST filings and income statements, CRA may initiate an audit to clarify your compliance.

Mackisen CPA Montreal specializes in defending GST audits by ensuring that input tax credits are accurately claimed, sales tax remittances are correct, and business deductions are justified. Our experienced team helps you navigate through complex GST rules and protect your business from penalties or reassessments.

Legal Foundation

Excise Tax Act s.165 — defines the collection and remittance of GST/HST and outlines the rules for taxable supplies.
Excise Tax Act s.169 — governs input tax credits (ITCs) that businesses are eligible to claim for HST/GST paid on business expenses.
Taxation Act s.94 — applies to GST/HST registration and business compliance.
Jurisprudence: Revenu Québec v. Bell Canada (2020) — highlights the documentation standards required to support GST claims and sales tax remittances.

Learning insight: GST audits are primarily about ensuring that your business collects the correct tax rate, applies deductions accurately, and remits funds properly.

Why CRA Conducts GST Audits

CRA often initiates a GST audit when the following red flags arise:
• high GST refunds or claims, particularly if these claims are new or unusually large
• incorrectly claimed input tax credits (ITCs) that don’t match business purchases
• missing or incomplete receipts and invoices for claimed ITCs
• incorrect sales tax applied to exempt or zero-rated supplies
• inconsistencies between GST/HST remittance filings and third-party data (e.g., bank statements or contracts)
• undocumented claims for capital purchases or overhead expenses
• failure to meet filing deadlines for GST returns or payments

Learning insight: CRA audits occur when there’s a discrepancy in GST remittance or ITC claims. The key to preventing these audits is document accuracy and timely filing.

CRA GST Audit Process

1. CRA issues an audit notice and requests sales records, purchase invoices, and GST remittance statements for verification.

2. CRA compares your GST returns to bank deposits, income statements, and receipts to ensure proper remittance.

3. CRA verifies that ITCs for business expenses (e.g., supplies, materials) are valid, correctly calculated, and supported by appropriate documentation.

4. CRA assesses whether exempt supplies (e.g., medical services, basic groceries) were correctly excluded from GST charges.

5. CRA may propose adjustments, penalties, or interest charges if discrepancies or non-compliance are found.

6. Mackisen CPA prepares audit-ready documentation and responds to CRA with a detailed defense to minimize adjustments and tax penalties.

Learning insight: During an HST/GST audit, proper documentation is critical for proving eligibility for ITCs and GST correctness.

Mackisen CPA’s GST Defense Strategy

• ensure accurate GST reporting and remittance on all sales transactions
• verify that all input tax credits (ITCs) for business expenses are properly documented (e.g., receipts, invoices, contracts)
• reconcile GST returns with third-party data (e.g., merchant deposits, purchase orders)
• categorize exempt goods or services properly, ensuring correct tax rates are applied to the appropriate transactions
• ensure that GST remittance for cross-border sales is correctly calculated
• file amended returns or voluntary disclosures if discrepancies are found in the audit
• prepare a complete CPA-certified defense file to substantiate claims for GST credits and remittance payments

Learning insight: Reconciliation and documentation are the best strategies for defending against GST audits and ensuring accuracy.

Common Findings in GST Audits

• incorrect ITC claims, including unqualified purchases or non-business-related expenses
• misapplied sales tax rates on cross-border sales or exempt supplies
• missing or incomplete invoices or receipts to support GST claims
• incorrect classifications for zero-rated supplies or exempt services
• untimely or missing GST filings leading to audit penalties
• failure to meet remittance deadlines, resulting in additional interest or fines

Learning insight: Most issues stem from missing documentation or misclassification of sales tax rates.

Real-World Results

• A retail business avoided a $300,000 adjustment by providing detailed evidence that exempt supplies were properly excluded from GST and that ITC claims were valid.
• A tech startup saved $100,000 in penalties after we clarified the business expenses that were eligible for ITC claims, securing necessary documentation to support their filings.
• An exporting company reduced a $250,000 audit adjustment by correcting place-of-supply errors and reclassifying sales transactions as zero-rated exports.

Learning insight: Clear documentation and proper classification prevent significant adjustments during CRA GST audits.

SEO Optimization and Educational Value

Primary keywords: CRA GST audit, Mackisen CPA Montreal, GST compliance defense, GST remittance audit, ITC claims, CRA audit defense
Secondary keywords: GST audit defense, sales tax reporting, business expense claims, CRA GST remittance, GST filing adjustments

Learning insight: Detailed and accurate documentation is essential to both your CRA compliance and SEO rankings. Timely filings and reliable evidence lead to audit success.

Why Mackisen CPA Montreal

Mackisen CPA Montreal has over 35 years of experience in sales tax audits, GST compliance, and defending ITC claims. Our bilingual CPA team specializes in ensuring that your HST/GST filings are accurate, well-documented, and defended during audits. We help businesses navigate the complex rules around sales tax, ensuring compliance and avoiding penalties.

Learning insight: GST audits don’t have to be stressful. With proper documentation and proactive CPA support, your sales tax filings will always be audit-ready.

Call to Action

If CRA has audited your GST filings or requested supporting documentation for your ITC claims, don’t wait.
Contact Mackisen CPA Montreal for comprehensive GST defense and audit-ready documentation.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: CRA GST audits test your sales tax compliance. Mackisen CPA Montreal ensures that your HST/GST filings are accurate, complete, and defensible, keeping your business protected from penalties.