Under the Ontario Rebate for Electricity Consumers Act, 2016, S.O. 2016, c. 19, “consumers” are entitled to “financial assistance” for their “eligible accounts”.
A “consumer” is not what you would think. It includes anyone who gets an invoice for an “eligible account”. Your business could have an “eligible account” either because (a) you don’t use more than 50 kW of power; or (b) you don’t consume more than 250,000 kWh a year; or (c) you carry on a regulated farming business; or (d) you fit into other categories.
What’s important here is that businesses or non-profit organizations and charities could qualify for this “financial assistance”. The financial assistance is essentially 8% of the pre-HST invoice. Obviously, the intent is to rebate electricity consumers the 8% provincial portion of the HST.
Now, CRA has looked at the effect of this provincial electricity rebate on a business’s or charity’s ability to claim input tax credits or HST rebates. CRA has concluded that this “financial assistance” has no effect on the business or charity’s ability to claim ITCs or rebates. The CRA view is that the “consumer” still pays the full electricity bill (the “base invoice amount” defined in the Ontario electricity rebate act) and still pays the full HST.
The CRA’s view here is not too surprising. It’s similar to the treatment of New Housing Rebates. Those rebates don’t change the HST payable on a new home purchase. All they do is change how the consumer funds the total amount due to the builder.
Where the CRA’s position is a bit surprising, though, is that the purchaser of a new home does not also get to claim a rebate or ITC that includes the New Housing Rebate. Here, even though the “consumer” business in Ontario gets the full electricity rebate, it also gets a full input tax credit. That means the same 8% is refunded to the business twice: once as an input tax credit (or HST rebate) and once as the Ontario electricity rebate.
The Ontario electricity rebate likely should be included in taxable income, though, under s. 12(1)(x) of the Income Tax Act. So some of the rebate might be recovered by Canada and Ontario if the business is taxable. But even so, there would be some double-counting here.
For the CRA’s interpretation, see CRA’s interpretation 182285 “GST/HST Ruling – August 2017: The impact of the Ontario’s 8% electricity rebate on ITCs/RITCs” (August 02, 2017).