Regarding the income tax effect of using the Quick Method of Accounting for the GST/HST on purchases (the “Quick Method”), CRA first noted that, in computing income from a business or property, the amount of deductible expenses included the GST/HST thereon – but that the amount of ITC or rebate claims were included in income pursuant to s. 12(1)(x) pursuant to s. 248(16) except to the extent that such amounts were applied to the related expense or expenditure amounts under ss. 12(2.2), 13(7.1) and 53(2)(k).
Regarding taxpayers who have elected to use the Quick Method (so that they no longer are entitled to claim ITCs or rebates, but are entitled to remit an amount lower than the actual GST/HST collectible, or collected), “the net gain experienced when using the Quick Method is considered government assistance and included in income under paragraph 12(1)(x).”
Furthermore, since such registrants are not entitled “to claim ITCs … for GST/HST paid on current expenses and inventory, the deductible cost of these expense for income tax purposes will include the GST/HST paid in respect of these expense.”