CRA GST/HST Compliance Audit — Montreal CPA Firm Near You: ITCs, Place of Supply

A CRA GST/HST Compliance Audit is one of the most frequent and technically challenging audits Canadian businesses face. The Canada Revenue Agency’s Indirect Tax Division reviews how your business collects, remits, and claims GST/HST on goods and services. From invoices and place-of-supply rules to input tax credits (ITCs) and exempt supplies, one small error can trigger years of reassessments. Mackisen CPA Montreal helps businesses navigate the complexity of GST/HST law, defend claims, and recover overpaid taxes while avoiding penalties and interest.

Legal Foundation

Law: Excise Tax Act (ETA) ss. 165–169 (GST/HST imposition and input tax credits); ss. 286–289 (books, records, and documentation requirements).
Jurisprudence: The Northwest Company Inc. v. Canada (2011 TCC) — confirmed that businesses must provide valid documentation proving GST was paid and that the purchase was for commercial activity.

Why CRA Audits GST/HST

The CRA uses automated cross-matching to verify that the GST/HST you collect aligns with what your suppliers remit and your customers claim as input tax credits. Any mismatch — missing invoices, wrong place-of-supply rate, or ineligible ITC — triggers a compliance audit. CRA’s focus is not only on underpayment but also on overclaimed credits, which can lead to penalties up to 25% of the disallowed amount.

Learning insight: CRA’s indirect tax audit is not about finding fraud — it’s about finding inconsistency. Every inconsistency costs money.

What Mackisen CPA’s GST/HST Compliance Review Includes

• Reconciliation of collected vs. remitted GST/HST across FPZ-500-V and CRA returns.

• Verification of input tax credits with supplier invoices and payment records.

• Review of exempt and zero-rated supplies (financial, exports, health, and education).

• Validation of place-of-supply rules for interprovincial transactions.

• Testing for GST/HST self-assessment on imports, intangible services, and digital products.

• Filing of voluntary disclosures or refund claims for prior-year corrections.

Learning insight: The difference between a valid ITC and a denied one often comes down to a single missing word on an invoice — the name, address, and GST number must always be visible.

Common Red Flags in CRA GST/HST Audits

• Invoices missing supplier GST numbers or incorrect registration status.

• Overclaimed ITCs on personal or mixed-use expenses.

• Inconsistent place-of-supply rules between provinces.

• Large GST refunds without documented proof of export or exempt status.

• Unregistered contractors or consultants incorrectly charging GST.

Mackisen CPA Montreal identifies and corrects these issues before they become CRA adjustments.

How Mackisen CPA Defends and Resolves GST/HST Audits

1. Performs a full ledger audit comparing sales, purchases, and GST/HST transactions.

2. Validates all invoices to ensure compliance with s. 169 of the Excise Tax Act.

3. Analyzes mixed-use assets and allocates commercial vs. personal use percentages.

4. Applies correct place-of-supply rules using CRA Memoranda 28-2 and 28-3.

5. Negotiates with CRA auditors to requalify denied ITCs and remove penalties.

6. Files amended FPZ-500-V or GST34 returns when adjustments are accepted.

Learning insight: CRA disallows ITCs when proof is missing, not necessarily when the expense is ineligible. Mackisen CPA’s documentation process bridges that gap.

Real Risks of GST/HST Non-Compliance

Even honest businesses can face significant penalties due to:

• Inaccurate rate applications (5%, 13%, 15%).

• Claiming ITCs before invoices are paid.

• Misunderstanding of taxable vs. exempt activities.

• Poor documentation or missing contracts.

Learning insight: GST/HST compliance is 90% documentation, 10% math. Mackisen CPA ensures you master both.

Financial Impact Example

A professional-services firm with $1.2M in annual expenses was reassessed for $84,000 in disallowed ITCs due to missing supplier registration numbers. After Mackisen CPA intervened and filed a structured objection with evidence, the entire amount was reinstated — with interest refunded.

SEO Optimization and Learning Value

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Learning insight: Documentation isn’t paperwork — it’s protection. Every invoice tells a tax story, and CRA expects every story to be complete.

Real Client Success

• A Montréal wholesaler avoided a $46,000 reassessment after Mackisen CPA traced supplier payments and validated GST numbers.

• A consulting firm recovered $22,000 in overpaid HST through our ITC review.

• An e-commerce company avoided penalties by reclassifying digital services under proper place-of-supply rules.

Why Mackisen CPA Montreal

Mackisen CPA Montreal is recognized for excellence in GST/HST, QST, and indirect tax audits. Our bilingual team combines legal precision with accounting accuracy, providing full audit defense for corporations, professionals, and non-profits. We communicate directly with CRA auditors, build evidence files, and ensure your credits, rates, and remittances are fully compliant.

Learning insight: CRA audits the system, not the person — Mackisen CPA ensures your system is airtight.