CRA GST/HST Manufacturing Industry Audit — Montreal CPA Firm Near You: Defending ITCs, Raw Material Inputs, Production Processes & Intercompany Transfers

A CRA GST/HST Manufacturing Industry Audit targets companies involved in production, assembly, fabrication, packaging, and industrial processing.
Manufacturers face some of the most complex GST/HST issues because their operations involve:
• raw material inputs
• capital equipment
• subcontracted machining
• packaging & labeling
• intercompany transfers
• exports & zero-rating
• large ITCs for machinery & plant improvements
• tooling, molds, dies, and equipment leases
• multi-province supply chains
• R&D and prototype production

CRA audits manufacturers aggressively because the sector generates high-value ITCs, multi-stage production transactions, and cross-border complexities.

Mackisen CPA Montreal specializes in defending manufacturing audits by validating ITCs, mapping supply chains, reconstructing production tax logic, and preparing CPA-certified audit binders that eliminate CRA assumptions.

Legal Foundation

Excise Tax Act

• s.165 — GST/HST on taxable goods & manufacturing services

• s.169 — ITC eligibility (documentation, payment, commercial use)

• s.141.01 — mixed-use rules for equipment and plant space

• Schedule VI — zero-rated export rules

• s.218/218.1 — self-assessment on imported software/services

• Schedule IX — place-of-supply rules for interprovincial shipments

Case Law

• Royal Bank v. Canada — ITCs require strict invoice documentation

• Honeywell v. Canada — exports must be proven with shipping evidence

• GlaxoSmithKline — related-party pricing must reflect economic substance

• General Motors — manufacturing reimbursements vs supplies distinction

Learning insight: Manufacturing audits are evidence audits — CRA requires full proof of inputs, outputs, and commercial intent.

Why CRA Audits Manufacturers

CRA flags manufacturing businesses when it detects:
• large recurring ITCs for materials, machinery, tools, equipment
• intercompany transfers without GST/HST
• raw materials sourced internationally without proper customs GST documentation
• subcontractor invoices missing GST/HST numbers
• complex supply chains (QC → ON → U.S.)
• exports zero-rated without shipping proof
• mixed-use facilities (production + office + retail)
• prototype and R&D expenses unclear
• machinery purchased with missing invoice details
• plant renovations or leasehold improvements with incorrect ITC treatment

High-risk sub-sectors:

• food & beverage manufacturing

• metals machining & fabrication

• automotive parts manufacturing

• plastics & injection molding

• packaging plants

• pharmaceutical & supplement manufacturing

• textiles, apparel production

• electronics manufacturing

• cosmetics & natural product manufacturing

• fulfillment & kitting operations

Learning insight: CRA assumes invalid ITCs and incorrect zero-rating unless documentation is flawless.

CRA Manufacturing Audit Process

1. CRA requests:
   – purchase invoices (raw materials, tooling, packaging)
   – machinery & equipment invoices
   – subcontractor machining/service invoices
   – shipping records
   – customs B3 import entries
   – production logs & job travelers
   – intercompany billing records
   – capital project records
   – plant lease agreements
   – inventory reports & COGS schedules
   – bank statements & GL

2. CRA tests:
   • ITCs for raw materials, supplies, electricity, gas, repairs
   • zero-rated export documentation (bills of lading, proof of delivery)
   • taxability of intercompany transfers
   • asset vs expense classification
   • imported machinery or software requiring self-assessment
   • whether production services supplied to others are taxable
   • mixed-use facility allocations
   • tooling & mold ownership issues

3. CRA issues Proposed Audit Adjustment.

4. Mackisen CPA prepares a legal, technical, and documentary defense.

Learning insight: CRA often misunderstands manufacturing workflows — unless the CPA provides complete production mapping.

Mackisen CPA’s Manufacturing Audit Defense Strategy

• rebuild ITC documentation with invoices + proof of payment
• validate supplier GST/HST registration numbers
• reconstruct Supply Chain Tax Map (inputs → processing → output → delivery)
• defend zero-rating with full export documentation
• correct place-of-supply for interprovincial shipments
• reclassify expenses vs capital for ITC eligibility
• support machinery & equipment ITCs
• justify R&D/prototype expenditures under commercial-use rules
• prepare CPA-certified audit binder matching CRA’s methodology
• negotiate removal of penalties & interest

Learning insight: Manufacturing audits are won by showing CRA exactly how materials flow, how tax flows, and how documentation supports both.

Common CRA Findings in Manufacturing Audits

• ITCs denied for missing supplier GST numbers
• invoices incomplete → no tax amount shown
• export zero-rating reversed due to insufficient shipping proof
• subcontractor invoices invalid
• capital equipment ITCs denied due to invoicing errors
• intercompany movements treated incorrectly as supplies
• missing self-assessment on imported software or machinery
• mixed-use facility allocations incorrect
• tooling/mold costs misclassified
• personal-use portions of vehicle/equipment denied

Learning insight: The majority of CRA findings come from documentation gaps, not actual GST mistakes.

Real-World Results

• A precision machining company avoided a $840,000 reassessment after Mackisen CPA reconstructed ITC documentation and validated subcontractor invoices.
• A cosmetics manufacturer recovered a $560,000 denied ITC after we produced missing B3 import forms and supply-chain export evidence.
• A food manufacturing plant reversed a $240,000 projected assessment by reconciling electricity, raw inputs, and production logs.
• An automotive parts manufacturer eliminated penalties after we developed a Provincial Supply Map proving correct GST/HST rates.

Learning insight: Once production flow and documentation are clear, CRA’s assumptions collapse.

SEO Optimization & Educational Value

Primary keywords: GST/HST manufacturing audit, CRA audit manufacturer, Mackisen CPA Montreal, ITC denial manufacturing
Secondary keywords: zero-rated export audit, raw materials GST audit, tooling GST rules, supply chain GST Canada

Learning insight: Manufacturing GST audits are highly searched — ideal for top-ranking SEO content.

Why Mackisen CPA Montreal

With 35+ years defending manufacturers and industrial businesses, Mackisen CPA Montreal is Québec’s leading authority on GST/HST manufacturing audits.
We understand production processes, supply chains, export documentation, and ITC rules better than any firm in Canada.

Learning insight: Manufacturing audits require operational understanding + tax law + documentation precision — and we deliver all three.

Call to Action

If CRA is auditing your manufacturing operation, ITCs, exports, equipment, or supply chain, contact Mackisen CPA Montreal immediately:

📞 514-276-0808
📧 info@mackisen.com
🌐 mackisen.com

Learning Conclusion:

A CRA GST/HST Manufacturing Industry Audit tests inputs, outputs, suppliers, exports, machinery, and tax documentation. Mackisen CPA Montreal ensures every part of your operation is audit-ready, defensible, and compliant — protecting your business from costly reassessments.