News and Insights

CRA Issues a New GST/HST Info Sheet on Core Charges

Tax Development Aug 15, 2014

The Canada Revenue Agency has recently issued GST/HST Info Sheet GI-167, “Application of the GST/HST to Core Charges”.  A core charge, also known as a casting charge, is an extra cost added by some vendors on the sale of selected automotive parts.  Core charges are often imposed by vendors in order to encourage customers to return used parts to vendors for rebuilding or remanufacturing.

For vendors choosing to impose core charges, these charges will form part of the consideration payable for the sale of the automotive part, and are therefore subject to the applicable rate of GST/HST.

However, if there is a trade-in, special GST/HST rules may apply.  These rules differ based on:

  1. the person making the trade-in (registered for GST/HST or not); and
  2. the timing of the trade-in (with a new purchase or as a separate transaction).

For example, if a GST/HST registrant trades-in a dead car battery and purchases a new one (for a vehicle used in its commercial activities), and the dealer adds a core charge, GST/HST would apply to both transactions:  i) the sale of the new battery along with the core charge from the dealer to the registrant, and ii) the “sale” of the dead battery from the registrant to the dealer.