An input tax credit (ITC) lets a GST/HST registrant recover the tax it paid on purchases used in its commercial activities. The credit is the mechanism that keeps GST/HST a tax on final consumption rather than a tax that compounds at every stage of production. When the Canada Revenue Agency denies an ITC, the registrant loses the recovery — and on audit, denied ITCs are the single largest category of GST/HST adjustment.
The important point, and the one most registrants miss, is that the majority of ITC denials are documentation denials, not substantive denials. The expense was real, the tax was paid, and the purchase was for commercial use — but the supporting document did not satisfy the specific requirements the law imposes, so the credit was disallowed. This guide explains those requirements, why ITCs get denied, and how to respond when a credit is challenged. It is general information, not advice for a particular file. For the audit process that surrounds these denials, see our GST/HST audit defence guide; for the underlying concept, see the glossary entry on the GST/HST input tax credit.
The documentary requirements: section 169(4) and the regulations
Subsection 169(4) of the Excise Tax Act makes a registrant's entitlement to an ITC conditional on obtaining, before filing the return in which the credit is claimed, sufficient documentary evidence. The detail of what counts as sufficient is set out in the Input Tax Credit Information (GST/HST) Regulations. The requirements are tiered by the value of the supply.
Supplies under $30. The information required is minimal, but the supplier's GST/HST registration number is generally still needed to support the credit.
Supplies of $30 to under $150. The documentation must show the supplier's name (or its registered trading or operating name), the supplier's GST/HST registration number, the date of the supply or invoice, and the total amount paid or payable along with the GST/HST charged (or a statement that the total includes GST/HST).
Supplies of $150 or more. In addition to the items above, the documentation must show the recipient's name (or registered trading name), a description of the supply sufficient to identify it, and the terms relating to the consideration. At this tier the CRA expects a complete invoice, not a credit-card slip.
The thresholds refer to the consideration for the supply, GST/HST included. The registration number requirement runs through every tier, which is why a missing or invalid number is so often the fatal defect. The documentation must be in hand when the return is filed — assembling it after the fact, in response to an audit query, is permitted to support the claim but is more difficult than keeping it contemporaneously.
Supplier registration validity
A registration number on an invoice is only useful if it is a valid, active GST/HST registration that belongs to the supplier who made the supply. The CRA can and does verify registration numbers against its records. Two problems recur.
First, the number may simply be wrong — transposed digits, a number that does not correspond to any registrant, or a number that belongs to a different entity. The CRA's online GST/HST Registry lets a registrant confirm that a supplier's number is valid and matches the supplier's legal or trading name on the date of the transaction, and using it before claiming significant ITCs is a sensible precaution.
Second, the supplier may have been deregistered, or may never have been registered at all, even though it charged an amount labelled as GST/HST. Tax collected by a person who is not a registrant is not properly creditable to the recipient as an ITC, and the recipient's recourse in that situation runs against the supplier, not the CRA. This is why a registrant cannot rely on the mere fact that "GST" appeared on the invoice; the supplier's registration has to be real.
Common reasons the CRA denies ITCs
Across audits, the denial reasons cluster into a familiar set:
- Missing supplier registration number. The most common defect, and almost always fatal to the credit unless cured. A receipt that omits the supplier's GST/HST number does not meet the regulatory minimum.
- Supplier name missing or mismatched. A receipt that shows only a trade name that does not match the registered name, or shows no supplier name at all, fails the requirement.
- Missing or incomplete amount. A document that does not show the total consideration and the GST/HST charged (or an inclusive statement) is insufficient at the relevant tier.
- No description of the supply. At the $150-or-more tier, the absence of a description sufficient to identify the supply is a defect.
- Purchase not shown to be for commercial use. An ITC is available only to the extent a purchase is used in commercial activity. The CRA may deny a credit where the registrant cannot show the business purpose, or may apportion the credit where the use is mixed.
- Timing. ITCs are subject to a claim period (generally four years for most registrants, two years for certain larger registrants and listed financial institutions). A credit claimed after the period has expired is denied on timing alone, regardless of documentation.
- Personal or non-creditable expenses. Certain expenses carry restrictions — for example, limits on credits for meals and entertainment, and the rules governing passenger vehicles and club dues — and ITCs claimed on them may be reduced or denied.
- Duplicate or consolidated claims. Credits claimed twice, or invoices from multiple suppliers consolidated in a way that obscures the per-supplier detail, draw denials.
How to respond to denied ITCs
The response to an ITC denial depends on why the credit was disallowed, and the work is best done item by item rather than in bulk. The starting point is to obtain the CRA's working papers or the schedule of denied credits, so that each denial can be matched to its stated reason.
Cure the documentation
Many documentation denials are curable. Where a receipt is missing the supplier's registration number, name, or a complete description, the original supplier can often issue a replacement or corrected invoice that contains the required information. A replacement invoice obtained from the supplier who actually made the supply is the cleanest fix for a documentation defect. The CRA's tolerance for this is real but not unlimited, and the replacement document has to reflect the actual transaction.
Reconstruct from alternative records
Where the original receipt is lost or destroyed and no replacement is available, alternative documentation may support the credit depending on the circumstances — credit-card and bank statements, supplier account statements, contracts, and correspondence that together establish the supply, the supplier, the amount, and the tax. This is a more difficult position than holding a compliant invoice, and the outcome turns on the strength of the reconstructed record, but it is sometimes the only path and is worth pursuing.
Establish commercial use
Where the denial rests on the CRA's view that the purchase was not for commercial use, the response is evidentiary: show how the purchase connected to the commercial activity, and where use was mixed, support a reasonable apportionment. Contemporaneous records — logs, project files, the nature of the business — carry the argument.
Use the proposal letter, then object
Timing matters. The most effective place to resolve ITC denials is at the proposal-letter stage, before a reassessment issues, because that is the last opportunity to supply replacement documentation and make submissions without the assessment being on the books. If the proposal response does not move the file, the denials can be carried into a notice of objection, which must be filed within 90 days of the assessment under section 301 of the Excise Tax Act. The objection moves the file to an Appeals officer who reviews it independently of the auditor. Our guide on how to file a notice of objection sets out the process, and the broader dispute path is described in the GST/HST audit defence guide.
When the denial is part of a larger reassessment
ITC denials rarely arrive in isolation. An auditor who is examining the credit side of a return is usually also looking at the supply side — whether sales were correctly characterized as taxable, zero-rated, or exempt, and whether the right rate was charged under the place-of-supply rules. A registrant focused only on recovering denied credits can lose sight of adjustments on the other side of the ledger that increase net tax just as much. The disciplined response treats the file as a whole: reconcile the denied ITCs against the documentation, but also confirm that the auditor's view of the registrant's taxable supplies, zero-rating, and rate application is correct, because conceding those points while fighting the ITCs can leave the registrant worse off than a coordinated response would. Where the same revenue or the same transactions also affect the corporation's income-tax position, the GST/HST file and the income-tax file should be worked together so that a concession on one does not create an unintended exposure on the other.
A note on collections
A reassessment that denies ITCs increases the registrant's net tax, and the resulting balance is generally collectible by the CRA even while an objection is outstanding — GST/HST collection is not automatically paused by an objection the way most income-tax collection is. That means a registrant disputing a significant ITC denial should plan for the cash-flow consequences in parallel with the dispute, not on the assumption that collection will wait. Where the balance is large and the corporation's ability to pay is in question, an unpaid GST/HST debt can also expose the corporation's directors to a personal assessment under section 323 of the Excise Tax Act, so the cash-flow analysis and the director-liability analysis are best considered together rather than in sequence.
Preventing ITC denials before they happen
Most ITC denials are avoidable with disciplined record-keeping. A few practices materially reduce exposure:
- Require complete invoices — supplier name, valid GST/HST number, date, description, and amount — from every supplier, and reject slips that do not carry the registration number for purchases at or above the relevant threshold.
- Verify the registration numbers of significant or recurring suppliers against the CRA's GST/HST Registry.
- Keep documentation organized by period so that an audit query can be answered without reconstruction.
- Track the claim-period deadlines so that no credit is lost to timing.
- Apply the restrictions on meals, vehicles, and similar categories correctly at the point of claim rather than discovering the issue on audit.
How Barrett Tax Law approaches denied ITCs
Our approach to an ITC denial is to take it apart credit by credit. We obtain the schedule of denied ITCs and the reason for each, separate the documentation denials from the substantive ones, and pursue the curable defects by obtaining replacement invoices or reconstructing the record from alternative sources. For credits denied on commercial-use or apportionment grounds, we assemble the evidentiary record that supports the business purpose. We make the submissions at the proposal-letter stage where possible, and we carry the unresolved denials into a notice of objection and, if necessary, a Tax Court appeal. Throughout, we treat the cash-flow dimension as a parallel workstream, because GST/HST collection is not suspended by an objection.
If the CRA has denied input tax credits on your file, the most useful first step is to obtain the detailed schedule of what was denied and why, and to note the objection deadline on any assessment you have received. To discuss a specific ITC denial, you are welcome to contact our office for a consultation.