Harmonized Sales Tax ("HST") will apply to prepayments made after May 1, 2010 for goods or services that would be provided on or after July 1, 2010. Any HST paid in the period by a business selling taxable supplies will be available as an input tax credit ("ITC").
To determine whether GST (5%) or HST (13%) applies to goods sold during the period that straddles July 1, 2010, suppliers must consider:
a) When goods are delivered or ownership is transferred before July 1, 2010
When a good is delivered, or ownership is transferred, to a purchaser before July 2010, only the GST at 5% applies to any amount that becomes due or is paid without having become due. Retail sales tax ("RST") at 8% may also be applicable. For example;
| Cost of equipment purchased for use by a business selling taxable supplies |
$10,000 |
| GST (5%) |
500 |
| RST (8%) |
800 |
| Total purchase price before July 1, 2010 |
11,300 |
| ITC claimed on GST return |
500 |
| Total cost of purchase made and delievered before July 1, 2010 |
$10,800 |
b) When goods are delivered, and ownership is transferred, on or after July 1, 2010
The following rules apply when a good is delivered, and ownership is transferred, on or after July 1, 2010:
For example, a purchase paid for after May 1, 2010 and delivered after July 1, 2010;
| Cost of equipment purchased for use by a business selling taxable supplies |
$10,000 |
| HST (13%) |
1,300 |
| Total purchase price |
11,300 |
| ITC claimed on HST return |
1,300 |
| Total cost of goods delivered/ownership transferred after July 1, 2010 |
$10,000 |
If you are supplying goods outside of Ontario, you will need to look to the place of supply rules for guidance. In general terms, the sale will be regarded as made in the province in which the goods are delivered or made available to the recipient. For example, if an Ontario retailer ships goods to Alberta, then Alberta becomes the place of supply and a rate of 5% GST (the federal component and no provincial component) would be charged.
