Ontario Tire Stewardship, 2026 TCC 77: subsection 296(2) of the ETA reaches input tax credits carried forward from earlier periods

2026 TCC 77 · Tax Court of Canada

Author: Sas Tullo

This is a GST/HST appeal about whether a registrant that discovered, years later, that it had left $1,057,793.22 of input tax credits off a return could still have them allowed. The credits arose in late 2012, the return that should have claimed them was for December 2013, and the omission came to light in 2018, after the four-year limit in the Excise Tax Act had passed. Visser J. held that subsection 296(2), which obliges the Minister to take unclaimed credits into account when assessing net tax, applies to credits carried forward from preceding periods, and allowed the appeal. The decision matters to any business that has let credits slip and is now being reassessed for a later period.

Facts

Ontario Tire Stewardship ran Ontario’s used tires program under the Waste Diversion Act, 2002, from 2009 to 2018 (paras 1-3). It charged stewards’ fees and paid GST/HST on its inputs (para 4). A CRA ruling of October 28, 2013, said that it could not claim input tax credits (para 5). To preserve its position OTS claimed what it believed were all of its credits since 2009, $16,541,253.12, in its December 2013 return (para 6). The Minister denied the claim, OTS objected, and the objection was held in abeyance by agreement pending the appeal of Stewardship Ontario, which succeeded in Stewardship Ontario v. Her Majesty the Queen, 2018 TCC 59, and was not appealed (paras 7-8).

Preparing for the verification audit that followed, OTS found that it had omitted credits of $1,057,793.22 from its July to December 2012 periods and asked in 2018 that they be added to the December 2013 claim (para 9). The reassessment of January 16, 2019, allowed the original claim in full but denied the unclaimed credits (para 10). The facts were agreed, and the Minister did not dispute that the credits would have been allowed had they been in the original return (paras 12, 14).

Issues

The sole issue was whether subsection 296(2) relieved against the limitation periods in section 225 so that OTS could claim the unclaimed credits in its December 2013 period (para 12), with alternative arguments on the abeyance agreement (para 55) and on the Court’s jurisdiction over refunds under subsection 296(4) (para 60).

Holding

The appeal was allowed and the reassessment referred back on the basis that OTS is allowed additional input tax credits of $1,057,793.22 for its December 2013 reporting period, with costs to the appellant (paras 62-63). The abeyance argument failed (paras 57-59), and the refund question was left to the Federal Court (paras 60-61).

The court’s reasoning

Subsection 225(1) computes net tax for a reporting period by deducting, in element B, input tax credits “for the particular reporting period or a preceding reporting period” claimed in the return for the period, while paragraph 225(4)(b) generally imposes a four-year limit on claiming them (paras 17-18). By 2018 the unclaimed credits were caught by that limit unless subsection 296(2) applied (para 19). That provision requires the Minister, in assessing net tax for a particular reporting period, to take into account an “allowable credit” that would have been allowed for the particular period had it been claimed on time, that was not previously claimed, and that would be disallowed only because the claiming period had expired (para 20). The Crown conceded paragraphs (b) and (c); the dispute was confined to paragraph (a), which speaks of a credit for the particular reporting period without the words “or a preceding reporting period” found in subsection 225(1) (paras 27-28, 30).

Toronto-Dominion Bank, 2009 TCC 264, affirmed 2010 FCA 73, and Canadevim Ltée v. The Queen, 2010 TCC 160, left the carry-forward question open (paras 31-34). Pawlak v. The Queen, 2012 TCC 355, where Webb J. rejected a literal reading of paragraph 296(2)(b) because it produced illogical results, was instructive, and the cases establish that subsection 296(2) is mandatory where its conditions are met (paras 35-36). The question was one of textual, contextual, and purposive interpretation under Canada Trustco Mortgage Co. v. R., 2005 SCC 54 (para 36).

Textually, the definition of net tax in subsection 225(1) expressly includes credits from preceding periods, and the reference to net tax in subsection 296(2) imports that definition; the presumption against tautology did not require Parliament to repeat the phrase, and section 15 of the Interpretation Act supported reading identical terms consistently (paras 38-41). Contextually, the particular reporting period in subsection 296(2) identifies the period under assessment and serves an administrative rather than a restrictive function, and paragraph 296(2)(c) refers to a reporting period of the person, which embraces both; Placer Dome Canada Ltd. v. Ontario, 2006 SCC 20, at paragraph 45, counsels against readings that render part of the statute redundant (paras 42-46). Purposively, subsection 296(2) is remedial: it ensures an assessment reflects true net tax liability rather than what was claimed or omitted, and so reduces cascading GST/HST (paras 47-48). The appellant’s reading does not open a “Pandora’s Box” of unlimited carry-forward, because it remains constrained by section 225, and the judge adopted the reasoning of Stratas J.A. in CIBC World Markets Inc. v. Canada, 2011 FCA 270, at paragraphs 36 to 40, that fiscal certainty is secured by the Act’s deadlines and does not override the objective of relief for recoverable tax absent clear wording (paras 49-52). OTS could have claimed every credit in some fifty monthly returns and appealed each; it had instead carried them forward into one return as the Act permits (para 53).

The abeyance agreement did not help OTS: limitation periods cannot be extended by agreement, and a waiver under subsection 298(7) extends only the Minister’s time to assess (paras 57-58). Refund questions under subsection 296(4) are for the Federal Court, but, as in Pawlak at paragraph 26, that did not prevent the Court from referring the assessment back (paras 60-61).

According to the consolidated text on the Justice Laws website, section 225 of the Excise Tax Act was last amended in 2014 and section 296 has been amended since the periods in issue, most recently in 2026.

Practical implications

The holding is narrow in form but potentially broad in effect. Whenever the Minister reassesses net tax for a period, subsection 296(2) now requires credits that could have been carried forward into that period to be taken into account, even though the time to claim them has expired, provided they were never previously allowed. The judge explained why Toronto-Dominion Bank is consistent: there, the credits could not have been carried forward to the period before the Court at all (para 54).

In my view the decision is a strong example of the purposive approach in the GST/HST context. The textual argument was close, and the judge said so (para 41); what carried the day was the structure of the net tax computation and the policy against cascading tax. Registrants facing a reassessment should therefore review the four preceding years for unclaimed credits while the objection or appeal is open, because the reassessment itself triggers subsection 296(2). The abeyance holding is a reminder that holding an objection in abeyance preserves nothing but the objection; limitation periods keep running.

Two cautions. The decision is a first-instance judgment on an issue the judge acknowledged was unsettled; whether an appeal was taken is not verified here. And the refund question was left open, so a registrant may win the assessment and still have to litigate payment in the Federal Court (para 61).

For a business owner, an overlooked credit is not necessarily lost. If the CRA reassesses a later period, the Act may require it to give credit for what you could have claimed, but the window is the ordinary four-year one, and the time to raise it is while the reassessment is still open.

This comment is general information, not legal advice. The law may have changed since the decision; check the current text in the tax wiki.

Citation and links

Ontario Tire Stewardship v. The King, 2026 TCC 77. Amended judgment and amended reasons dated May 8, 2026, issued in substitution for the judgment and reasons of May 7, 2026 (appeal heard September 23, 2024, at Toronto). Visser J. Docket 2019-1330(GST)G. Reasons on the Tax Court’s site. Also on CanLII. This was a first-instance appeal; there is no decision under appeal.