What happens to the GST when you correct a Canadian import entry?

How is GST worked out on a Canadian import?

Section 212 of the Excise Tax Act makes every person liable to pay duty on imported goods, or who would be liable if the goods were dutiable, pay GST "at the rate of 5% on the value of the goods". Section 215 then defines that value, usually called the value for tax, as the total of:

• the value for duty under the Customs Act, whether or not the goods are dutiable; and
• "the amount of all duties and taxes, if any, payable on the goods under the Customs Tariff, the Excise Act, 2001, the Special Import Measures Act" and any other customs law.

Three consequences follow, and each one shows up in an audit.

1. Duty-free goods still carry GST. CBSA Memorandum D11-6-6 repeats it: "duty-free goods may be subject to the GST."
2. The surtax is in the base. Canada's surtax orders are made under the Customs Tariff, so the surtax is added before the 5% is applied. Customs Notice 26-23, on the United States Surtax Order (2026), says GST is calculated on a value for tax "inclusive of surtax even when customs duties are remitted", and its first worked example takes a value for duty of CAD 150, adds CAD 37.50 of surtax and charges CAD 9.38 of GST on CAD 187.50.
3. SIMA duty is in the base too. Anti-dumping and countervailing duty are payable under the Special Import Measures Act, so a SIMA assessment raises the GST with it.

So GST is never independent of the rest of the line. Change the value for duty, the tariff item, the origin, the surtax or the SIMA duty, and the GST moves by 5% of the change.

What happens to the GST when a correction raises the duty?

A correction under section 32.2 of the Customs Act fixes an origin, tariff classification or value for duty declaration once the importer has reason to believe it was wrong; the clock and the CARM steps are in correcting a Canadian entry. The GST rides along in two ways.

The CBSA treats the GST as part of the correction. Section 216 of the Excise Tax Act applies the Customs Act to the value of goods and to their tax status "as if it were" the appraisal of the value for duty or the determination of the tariff classification. D11-6-6 draws the practical conclusion: "any GST amount payable is subject to interest and penalty provisions contained in the Act relating to duty amounts payable." The extra GST is paid with the extra duty, and interest runs on both.

A registrant gets the extra GST back, but not the interest. Section 169 of the Excise Tax Act gives an input tax credit for tax on an importation that "becomes payable by the person or is paid by the person without having become payable" in a reporting period, to the extent the goods are for use in commercial activities. The additional GST on a correction is tax on the importation, so it is creditable in the period it is paid. Interest is not tax and stays a cost.

For a fully taxable business the GST on a correction is therefore a timing cost: cash out with the correction, cash back on the next return. For anyone who cannot claim a full credit, it is a real cost. That includes:

• financial institutions and other businesses with exempt supplies, who claim only the commercial-use share under the formula in section 169;
• importers that are not GST registrants, including unregistered non-resident importers (see non-resident importers in Canada);
• goods imported for a non-commercial use.

What happens to the GST when a correction lowers the duty?

This is the part that surprises finance teams. A refund of customs duty or surtax under section 74 of the Customs Act lowers the value for tax, so the GST that should have been paid falls too. But the CBSA does not send that GST back.

The reason is a definition. Section 2 of the Customs Act defines duties as duties or taxes levied on imported goods under the Customs Tariff, the Excise Tax Act and other Acts, but "for the purposes of subsection 3(1), paragraphs 59(3)(b) and 65(1)(b), sections 69 and 73 and subsections 74(1), 75(2) and 76(1), does not include taxes imposed under Part IX of the Excise Tax Act". Part IX is the GST. A section 74 refund covers duties, and for that section GST is not a duty.

Memorandum D17-2-1 sets out the consequence: the CBSA "will not issue a credit for the GST refund to the importer's account". Instead:

• GST registrants receive the amount "as an input tax credit from the Canada Revenue Agency". In practice they already have it. Section 169 allows the credit on tax "paid by the person without having become payable", so the full GST paid at the border, including the part that turns out to be too much, was creditable when it was paid. There is nothing further to claim.
• Non-registrants send Form GST189, General Application for Rebate of GST/HST, to the CRA with the CBSA's statement of adjustment (SoAdj). The Excise Tax Act rebates behind it are in section 215.1, which covers goods imported for a use other than exclusively commercial activities, or by an unregistered small supplier, and gives two years from the day the GST was paid, and in subsection 216(6), which rebates GST overpaid because of a re-appraisal of value or a tax status decision. Section 263 stops any of these rebates to the extent the person claimed or could claim an input tax credit for the same amount.

What does a GST status code error need?

Each CAD line carries either the GST rate or a GST exemption code. A wrong code is a tax status error, and section 216 treats it as a classification decision. D11-6-6 is explicit on two points:

1. A correction "affecting only the GST status of the goods (e.g., the incorrect use of a GST status code)" is made under section 32.2 when it results in an amount payable or is revenue neutral.
2. Because GST is excluded from section 74, the rule that lets importers skip a correction when it would only produce a refund does not apply to GST. "Where goods are duty-free but taxable, importers shall make a correction to the declaration pursuant to section 32.2 of the Act when they have reason to believe that the declaration is incorrect, even where the adjustment request would result in a decrease of the amount of the GST assessed."

The memorandum's own example: duty-free taxable goods declared at CAD 3,000 that should have been CAD 2,000. The importer must correct the value, and "the decrease in the GST assessment would not result in a refund of the GST under the Act." A GST exemption code used on goods that do not qualify is the reverse case: an underpayment of the whole 5%, with interest.

A worked line: one audit, two corrections

The figures are illustrative and round, and so are the duty rates; GST is the statutory 5%. An importer that is a fully taxable GST registrant has two CAD lines from March 2026 in an audit.

Line 1, underpayment. Value for duty CAD 200,000, entered under a free tariff item. The audit finds the goods belong under an item at 6.5%.

The CAD 650 of GST comes back as an input tax credit in the reporting period the correction is paid. The CAD 13,000 and the interest on CAD 13,650 do not.

Line 2, overpayment. Value for duty CAD 100,000, entered under an item at 8%; the right item is free.

The CAD 400 of excess GST is not lost: the importer claimed an input tax credit of CAD 5,400 when it paid, which section 169 allows. If the importer were a financial institution claiming 40% of its import GST, the picture changes. On line 1 it pays CAD 650 and recovers CAD 260; on line 2 it paid CAD 5,400 and recovered CAD 2,160, so CAD 160 of the CAD 400 excess came back inside its credit and the other CAD 240 is lost unless it applies, within two years of paying the GST, for the section 215.1(2) rebate on goods imported for other than exclusively commercial use, which section 263 limits to the part not covered by a credit.

Net for the fully taxable importer: CAD 13,000 paid and CAD 8,000 refunded on duty, GST neutral, interest on line 1 as the only cost the GST adds.

What about surtax remission and drawback?

Two other routes return surtax or duty without correcting the line.

• Remission. Customs Notice 25-19, on the United States Surtax Remission Order (2025), sets out how surtax is relieved at the border or refunded after payment, but says nothing about the GST charged on that surtax, and Customs Notice 26-23 says GST is calculated on a value for tax that includes the surtax "even when customs duties are remitted". The section 215.1(2) rebate for non-registrants is tied to refunds under sections 73, 74 and 76 of the Customs Act, not to remission orders. For a fully taxable registrant this has no cash effect, because the GST it paid on the surtax was creditable when paid. A non-registrant or partial claimant should ask the CBSA and the CRA before counting on any GST coming back with a surtax remission.
• Drawback. CBSA Memorandum D7-4-2 says GST/HST "cannot be refunded by drawback", and Memorandum D7-4-3 says the CUSMA limits on drawback do not affect GST relief or input tax credits. See Canadian drawback on exports to the US or Mexico.

Who claims the credit when the importer of record is someone else?

The CRA's Policy Statement P-125R says only the de facto importer, "the person who causes the goods to be imported", is considered to have imported the goods for input tax credit purposes. That person may not be the importer of record named on the CAD. A broker or a foreign supplier may be the importer of record, and the Canadian buyer the one entitled to the credit, provided it holds a copy of the customs documentation and evidence the GST was paid on its behalf.

For a correction, that means two parties need the paper: the importer of record files and pays it, and the person claiming the credit needs the corrected CAD and the CBSA's decision to support the extra credit. Agree in advance who passes the corrected documents along.

How long do you have to claim the extra credit?

Section 225(4) of the Excise Tax Act generally allows an input tax credit to be claimed in a return filed by the due date of the return for the last reporting period that ends within four years after the end of the period in which it could first be claimed. A shorter limit, generally the return for the last period ending within two years after the end of the fiscal year, applies to "specified persons": listed financial institutions, and businesses whose taxable supplies, with those of associated persons, exceeded CAD 6 million in both the current and the previous fiscal year, unless all or substantially all of their supplies are taxable. For most importers that means four years from the period in which the correction GST was paid, which sits comfortably beside the four-year section 74 window on the duty side.

How do you check the GST on your own CAD lines?

1. Recompute the value for tax on every line: value for duty plus customs duty, surtax and SIMA duty. A line whose GST is 5% of the value for duty alone, while a surtax or SIMA duty sits on it, is short.
2. Recompute after every correction or refund in the audit. List the GST change next to each duty change so finance sees the credit to claim and the excess already covered.
3. Read the GST status code. Exemption codes are a frequent source of findings, and D11-6-6 requires a section 32.2 correction even when the error overstated the GST.
4. Find out who claims the credit. If the importer of record is a broker or a supplier, confirm the claimant holds the CADs and the decision letters.
5. Flag partial claimants. If your input tax credit is restricted, the GST on underpayments and the excess on refunds are real money; price them in.

TariffSense reads CAD/B3 lines and broker accounting exports, recomputes the value for tax and GST on each line from the value for duty, duty, surtax and SIMA amounts, flags lines where the GST base leaves out a surtax or SIMA duty or the GST status code does not fit the goods, and shows the GST change beside every duty finding so the correction and the credit can be booked together. The post-entry audit page shows what goes in and what comes back. For the full order of calculation on one line, see duty, surtax and GST on a Canadian import.

What should you do next on your own entries?

Take the corrections and refunds from your last audit and add a GST column: 5% of each duty, surtax and SIMA change. Book the extra credit for the underpayments in the period you pay them, and do not wait for the CBSA to return GST on the refunds, because it will not. If your organization claims less than a full input tax credit, or the importer of record is someone else, settle with your tax team who claims what before you file. Confirm the filing route and the timing with a licensed customs broker or tax advisor. The audit side is covered in auditing CAD/B3 entries after accounting.