The taxpayer claimed that it was entitled to input tax credits (ITCs) pursuant to s. 178.8 respecting cellphone and other goods which it had acquired, for resale in Canada by it, from non-registrant, non-resident suppliers.
Regarding the general purpose and scope of s. 178.8, MacPhee J stated (at para. 53):
Section 178.8 is designed to provide relief in a circumstance where a non-resident sells a supply to a Canadian registrant whereby legal delivery occurs outside Canada, but the Canadian registrant does not import the supply into Canada. In such a circumstance, the non-resident would be required to pay GST/HST on import, but the non-resident might not be able to qualify for ITCs. Section 178.8 provides the possibility of qualifying for an ITC to the Canadian purchaser by deeming the Canadian purchaser as having paid GST/HST on import to prevent double payment of GST/HST in what is effectively commercial activity.
After noting (at para. 54) that s. 178.8 “only deems tax to have been paid or payable to the extent that tax was in fact paid or payable on importation,” MacPhee J rejected the taxpayer’s ITC claim given inter alia that it had not rebutted CRA’s “assumption that no GST/HST was paid upon importation,” i.e., that the non-resident suppliers had not borne GST on the goods’ importation.