Application of the HST to Imports

GST/HST Technical Information Bulletin B-081
February 28, 1997

This bulletin does not replace the law found in the Excise Tax Act and its Regulations. It is provided for your reference. As it may not completely address your particular operation, you may wish to refer to the Act or appropriate Regulation, or contact any Revenue Canada tax services office for additional information. If you are located in the province of Quebec, please contact the ministere du Revenu du Quebec (MRQ) for additional information.

This bulletin reflects amendments proposed to the Excise Tax Act contained in Bill C-70, which received third reading and was passed by the House of Commons on February 11, 1996. At the time of publication, Parliament has not enacted these proposed amendments. Any commentary in this bulletin should not be taken as a statement by the Department that such amendments will in fact be enacted into law in their current form.

Table of Contents

• Introduction
• Imported Non-Commercial Goods
  • Tax in a participating province
  • Exceptions
• Imported Commercial Goods
  • Tax in a participating province
  • Exceptions
  • Value of goods
  • Payment of tax
• Imported Taxable Supplies
  • Tax in a participating province
  • Payment of tax

Introduction

This bulletin outlines how the harmonized sales tax (HST) will be applied to goods and services imported by residents of a participating province (i.e., Nova Scotia, New Brunswick, and Newfoundland). In this bulletin, the term “provincial component of the HST” means the provincial component of the HST that is imposed at the rate of 8%. This bulletin will also discuss how and when the provincial component of the HST is to be paid. These provisions are set out in Part IX of the Excise Tax Act (the Act).

The implementation date for the HST in Nova Scotia, New Brunswick and Newfoundland is April 1, 1997.

The provincial component of HST does not apply to goods or imported taxable supplies imported by residents of the Nova Scotia and Newfoundland offshore areas unless the goods or imported taxable supplies are imported for consumption, use or supply in the course of an offshore activity or the person is a resident in a participating province that is not an offshore area.

Imported non-commercial goods

Tax in a participating province
(s 143.1, s 212, new s 212.1, new s 214.1, ss 215.1(2))

Residents of a participating province who import taxable non-commercial goods (other than zero-rated goods) from outside Canada may be liable to pay the 15% HST (7% federal component plus 8% provincial component) on the goods. For HST purposes, “commercial goods” will be defined in the same manner as they are for customs purposes, and will include goods that are imported for sale or for any commercial, industrial, occupational, institutional or other like use. Where tax is payable the 7% federal component will always be charged. In addition, the HST will be charged when residents of a participating province import goods that are accounted for under the Customs Act as other than “commercial goods”. It will be payable by the person who is liable under the Customs Act to pay duty on the imported goods or would be liable if the goods were subject to duty. The HST will be calculated on the excise and duty-paid value of the imported goods and will be collected by Canada Customs at the time of importation as if the tax were a duty imposed under the Customs Tariff .

The HST will be collected by Customs on goods imported by residents of a participating province regardless of where they enter Canada.

Importations of taxable goods sent by mail or courier to an address in a participating province will be taxed at the 15% rate except for goods with a value for duty not exceeding $20 (other than those goods listed in the Mail and Courier Imports (GST) Regulations ).

Publications
(s 143.1, new s 212.1)

Registered foreign publishers will be required to charge the HST on newspapers, periodicals, magazines and similar publications that are destined for a participating province. If a publisher is not registered for the GST, the 15% HST will be charged to the recipient at the time of importation.

Point of sale rebate on printed books 
(new s 214.1, s 259.1)

Printed books (as defined in section 259.1 and including subscriptions to periodicals that contain no more than 5% advertising, audio recordings of printed books, and bound or unbound printed versions of religious scriptures) will effectively have a point of sale rebate applied at the time of importation. That is, the provincial component of the HST calculated on the imported material will be deducted from the total amount payable at the time of importation.

Returned goods
(new ss 215.1(2))

The existing rebate for unregistered small suppliers or other persons who import goods for consumption, use, or supply otherwise than exclusively in the course of commercial activities, and return them because they were damaged, of inferior quality, defective, not the goods ordered, or an incorrect quantity, will be extended to include the provincial component of the HST, provided that the provincial component has been paid on the goods. The person must file a rebate claim within two years after the day the tax was paid in order to receive the rebate.

Exceptions
(new s 212.1, Schedule VII)

The provincial component of the HST is not payable in respect of the importation of a specified motor vehicle or mobile or floating homes that have been used or occupied in Canada by an individual. These goods will continue to be subject to any applicable 7% federal component at the time of importation. Special self-assessment provisions for the provincial component for these types of goods are explained in the following paragraphs.

As in the case of the GST, the provincial component of the HST will not be payable on imported goods listed in Schedule VII, Non-taxable Importations, to the Act.

Specified motor vehicles are defined in subsection 123(1) as vehicles that are, or that would be, if they were imported, classified under any of several tariff headings in Schedule I to the Customs Tariff . In general, these include almost all motor vehicles, other than racing cars classified under heading 87.03, and any prescribed motor vehicle.

Imported commercial goods

Tax in a participating province
(s 212, s 213, new s 220.02, new s 220.04, new s 220.07, new s 220.09, Schedule VII, Schedule X)

Commercial importations will be subject to the 7% federal component at the time of importation. However, persons importing a specified motor vehicle or goods accounted for as commercial goods (other than specified motor vehicles) into a participating province from a place outside Canada, may be required to self-assess the 8% provincial component where the goods are destined for use in a participating province. The provincial component of the tax is calculated on the value of the vehicle or the goods. Details concerning the value to be applied for different types of goods are provided on page 5. There are exceptions to the application of the provincial component of the tax which are explained in the following paragraphs.

Exceptions
(s 213, 220.04, Schedule VII, Schedule X)

Commercial importations will not be subject to the 7% federal component where the importation is relieved of the federal component (GST) under section 213, and Schedule VII, Non-Taxable Importations, to the Act.

Self-assessment of the provincial component of the HST is not required for:

• selected listed financial institutions;
• commercial goods, other than a specified motor vehicle, that are to be consumed, used or supplied exclusively (meaning 90% or more) in a registrant's commercial activities. However, registrants who use the Quick Method of accounting, the Special Quick Method of Accounting for Public Service Bodies, or charities using the simplified net tax calculation method will have to self-assess regardless of whether the goods are for use exclusively in their commercial activities;
• mobile homes or floating homes that have been used or occupied in Canada as a place of residence for individuals; or
• goods that are included in Schedule VII to the Act, Non-Taxable Importations.

Value of goods
(new s 220.07)

Participating provinces will apply the provincial component of the HST on specified motor vehicles based on the prescribed value (generally the value determined by the applicable provincial licensing authority). The 7% federal component of the HST will be assessed at the time of importation.

Persons importing prescribed property into a participating province under prescribed circumstances will be required to self-assess the provincial component of the HST based on its value as determined in a prescribed manner. Regulations will be developed for this purpose but no property has been prescribed to date. The provincial component related to any other property is to be calculated on the excise and duty-paid value in accordance with section 215 of the Act.

Payment of tax
(new s 220.07, new s 220.09)

The provincial component of the HST on a specified motor vehicle is payable by the person who imports the vehicle into the participating province on the earlier of the day the person registers the vehicle or the day the vehicle is required to be registered. The provincial component of the HST is not required to be reported on a return as it will be collected by provincial authorities at the time the vehicle is registered.

For goods brought into a participating province, the provincial component of the HST is payable on the day the goods are brought into the province. Registrants should account for the provincial component of the HST on their regular GST/HST return for the reporting period in which the tax became payable.

Non-registrants must pay the provincial component of the HST to the Receiver General and file the Form GST 489, Tax Return for Self-Assessment of the Provincial Portion of the Harmonized Sales Tax , filed no later than the last day of the calendar month following the month in which the tax became payable. (No return is required to be filed where the tax payable is zero.)

Imported taxable supplies

Tax in a participating province
(s 217, new s 218.1, new s 218.2, s 219)

Persons acquiring imported taxable supplies of intangible personal property and services for consumption, use or supply in Canada (in participating as well as non-participating provinces) will continue to self-assess the 7% federal component (GST) as is currently required under Division IV of the Act. In addition, residents of a participating province will also be required to self-assess the 8% provincial component on an imported taxable supply of intangible personal property or a service (other than a zero-rated supply) that is for consumption, use or supply primarily (i.e., more than 50%) in the participating province.

Every registrant who is a recipient of an imported taxable supply as defined in paragraph (b) of section 217 ( i.e., drop-shipped tangible personal property) must

self-assess the 8% provincial component where physical possession of the property is transferred to the registrant in the province. In addition, every person who is the recipient of a taxable supply of tangible personal property described in paragraph (b.1) of the definition of “imported taxable supply” that is delivered or made available to the person in a participating province will be required to self-assess tax on the supply regardless of the extent to which it was acquired for consumption, use, or supply in a participating province, provided the person is either a registrant or a resident of a participating province.

In the case of an imported taxable supply of tangible personal property (including drop shipments) the tax is to be assessed based on the full value of the consideration that is paid or becomes due. For any other property or service, the tax is to be assessed on the percentage of the total consideration paid for the supply that the consumption, use or supply by the recipient in the participating province, is of the total consumption, use or supply of the intangible personal property or service.

Selected listed financial institutions
(s 218.1)

Selected listed financial institutions are not required to self-assess and account for the provincial component of the HST under this provision as this is done through adjustments to their net tax calculation under subsection 225.2(2).

Payment of tax
(s 218.2, s 219)

The provincial component of the HST relating to imported taxable supplies is payable on an amount of consideration for a supply each time it becomes due or is paid without having become due.

Registrants should account for the provincial component of the HST on their regular GST return for the reporting period in which the tax became payable. Non-registrants must generally pay the provincial component of the tax to the Receiver General and file form GST 59, Goods and Services Tax/Harmonized Sales Tax Return for Imported Taxable Supplies , no later than the last day of the calendar month following the month in which the tax became payable. More information concerning these rules may be obtained from your local Revenue Canada tax services office.