Ontario and British Columbia: Transition to the Harmonized Sales Tax - Transportation Passes

GST/HST Info Sheet GI-055
June 2010

This info sheet replaces the version dated February 2010. It has been revised to reflect changes announced in the New Harmonized Value-Added Tax System Regulations.

This info sheet explains whether the goods and services tax (GST) or the HST applies to a sale of a transportation pass where the pass period includes the July 1, 2010 implementation date of the HST in Ontario and British Columbia.

In this info sheet, all suppliers referred to in the examples are GST/HST registrants and the supplies are taxable. "Taxable" means subject to the 5% GST or to the HST rate in effect in a particular province.

Introduction

The following rules apply to a transportation pass that entitles a person to receive transportation services without having to pay an additional amount each time that the person receives a transportation service because of the pass.

The transitional rules for transportation passes are based, in part, on the pass period. For the purposes of this info sheet, a pass period is the period throughout which the transportation pass entitles a person to transportation services. Generally, it begins and ends on the dates specified on the pass.
If the transportation pass does not specify the beginning and end dates of the pass period, the period

• begins on the day the pass is delivered or made available to the purchaser; and
• ends on the day the pass expires (if there is no expiry date, the period ends on July 1, 2012).

Transportation pass sold during the period that includes July 1, 2010

To determine whether GST or HST applies to a sale of a transportation pass where the pass period includes July 1, 2010, suppliers must consider when the pass period begins and ends.

Pass period begins before July 2010 and ends before August 2010

GST applies to a transportation pass if the pass period begins before July 2010 and ends before August 2010.

Pass period begins before July 2010 and ends after
July 2010

The following rules apply when the pass period begins before July 2010 and ends after July 2010:

• Regardless of the pass period, GST applies to any amount that becomes due or is paid without having become due on or before October 14, 2009.
• Regardless of the pass period, GST applies to any amount that becomes due or is paid without having become due after October 14, 2009, and before May 2010. Certain purchasers have to self-assess the provincial part of the HST. For more details on self-assessment, see the information under the heading "Self-assessing the provincial part of the HST".
• When an amount becomes due or is paid without having become due on or after May 1, 2010:
  • GST applies to the portion of the transportation pass that covers the period before July 2010; and
  • HST applies to the portion of the transportation pass that covers the period on or after July 1, 2010.

The Appendix to this info sheet contains information on when an amount becomes due and when an amount is paid without having become due.

For information on who accounts for the tax and when it should be accounted for, see the information under the heading "Accounting for GST/HST charged on transportation passes".

Pass period begins on or after July 1, 2010

HST applies to transportation passes if the pass period begins on or after July 1, 2010, and the amount becomes due or is paid without having become due on or after May 1, 2010.

Accounting for GST/HST charged on transportation passes

The rules listed above explain whether GST or HST applies to a transportation pass. The following rules explain who accounts for the tax and when it should be accounted for.

When an amount becomes due or is paid after
October 14, 2009, and before May 2010

When an amount becomes due or is paid without having become due after October 14, 2009, and before May 2010, the supplier charges the purchaser GST and accounts for the tax in its GST/HST return according to the normal rules. Certain purchasers have to self-assess the provincial part of the HST. For more details on self-assessment, see the information under the heading "Self-assessing the provincial part of the HST".

When an amount becomes due or is paid on or after
May 1, 2010, and before July 2010

When GST applies to a transportation pass or a portion of a pass, the supplier accounts for the tax in its GST/HST return according to the normal rules.

When HST applies to a transportation pass or a portion of a pass, the supplier accounts for:

• the 5% federal part of the HST in its GST/HST return according to the normal rules; and
• the provincial part of the HST in the GST/HST return for the reporting period that includes July 1, 2010. The purchaser, if a registrant, would be able to claim any eligible input tax credit in its GST/HST return for the reporting period that includes July 1, 2010.

When an amount becomes due or is paid on or after
July 1, 2010

When an amount becomes due or is paid without having become due on or after July 1, 2010, the supplier accounts for the GST and/or the HST in its GST/HST return according to the normal rules.

Self-assessing the provincial part of the HST

When an amount for a transportation pass becomes due or is paid without having become due after October 14, 2009, and before May 2010, the supplier charges GST regardless of the pass period. Certain non-consumers have to self-assess the provincial part of the HST on the portion of the pass that covers the period on or after July 1, 2010.

This self-assessment rule may apply to a person that is a sole proprietor, a business, an organization, a public service body, or any other entity.

A non-consumer must self-assess the provincial part of the HST if the non-consumer:

• does not purchase the transportation pass for consumption, use or supply exclusively in its commercial activity;
• is using a simplified accounting method to calculate its net tax;
• is purchasing the pass that is subject to input tax credit recapture; or
• is a selected listed financial institution.

The non-consumer accounts for the provincial part of the HST either:

• on line 405 of the GST/HST return for the reporting period that includes July 1, 2010, if the due date for this return is before November 2010; or
• in any other case, by completing Form GST489, Return for Self-Assessment for the Provincial Part of Harmonized Sales Tax (HST), and paying that amount before November 2010.

Appendix - When an amount becomes due or is paid without having become due

The following rules explain when an amount becomes due and when an amount is paid without having become due. These rules apply to services and supplies of tangible and intangible personal property.

Amount becomes due

Generally, an amount for a supply becomes due on the earliest of the following days:

• the date of an invoice for that amount for the supply;
• the day the supplier first issues that invoice for the amount;
• if there is an undue delay in issuing that invoice, the day the supplier would have issued the invoice; and
• the day the client is required to pay that amount under a written agreement (other than a written agreement for the supply of property by way of lease, licence or similar arrangement).

An amount for a supply of property made by way of lease, licence or similar arrangement under a written agreement becomes due on the day the client is required to pay that amount under the written agreement.

For information on what is a written agreement for GST/HST purposes, refer to GST Memorandum 300-6-4, Agreements in Writing.

Amount is paid without having become due

An amount is paid without having become due when a client pays an amount for a supply:

• before the date of the invoice, or before a supplier issues, or would have issued, the invoice;
• before the client is required to pay the amount under a written agreement (other than a written agreement for the supply of property by way of lease, licence or similar arrangement) and no invoice has been issued; or
• before the client is required to pay the amount under a written agreement for the supply of property by way of lease, licence or similar arrangement.

More than one invoice or payment

Sometimes, more than one amount becomes due or is paid without having become due. This could happen when, for example, a supplier issues more than one invoice or when the client is required to make more than one payment under a written agreement. In this case, for each amount, the supplier must determine whether GST or HST applies. The supplier cannot, for example, just apply the HST on the final amount or on the total amount payable for the supply.