One of the CRA’s latest projects appears to involve the scrap gold and telecommunications industries, which has been the subject of a number of recent CRA audits, culminating in a number of legal challenges in various contexts.
In the May 2020 case of Express Gold Refining Ltd. v. Canada, the taxpayer was in the business of buying scrap gold and other precious metals, and getting it refined for resale in a pure form. It paid the GST/HST on its purchases, but did not collect this tax on its sales on the basis that sales of refined precious metals are not subject to GST/HST. It generally filed credit returns, and the CRA began an audit – while delaying a GST refund of near $10 million. While not identifying this as a “GST carousel” audit, the CRA did admit that the taxpayer’s GST return had initially been flagged by an automatic system for further screening, and that the CRA had identified the scrap gold business as “a high risk industry”.
In Iris Technologies Inc. v. Canada, a more recent “GST carousel” case released over the summer months – albeit in the telecommunications sector – the CRA did appear to accuse the taxpayer of participating in a “carousel scheme”, all the while attempting to deny ITCs of over $62 million!