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

GST/HST Info Sheet GI-056
July 2010

This info sheet explains whether the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST) applies to services performed during the period that 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. In this info sheet, "taxable" means subject to the 5% GST or to the HST rate in effect in a particular province.

This info sheet does not apply to services performed on a continuous basis by means of a wire or other conduit, or satellite or other telecommunication facility, such as cable television, satellite television or cellular phone services. Also, it does not apply to services supplied under a budget payment arrangement. For more information, refer to GST/HST Info Sheet GI-076, Ontario and British Columbia: Transition to the Harmonized Sales Tax – Continuous Supplies and Budget Payment Arrangements.

Introduction

To determine whether GST or HST applies to services performed during the period that includes July 1, 2010, suppliers must consider:

• when the service is performed;
• when an amount for the service becomes due; and
• whether an amount is paid without having become due.

Refer to Appendix A for a chart that illustrates the general transitional rules for services performed during the period that includes July 1, 2010.

Refer to Appendix B for information on when an amount becomes due and when an amount is paid without having become due.

When 90% or more of the service is performed before July 2010

When 90% or more of the service is performed before July 2010, only the GST applies to any amount that becomes due or is paid without having become due for the service. Suppliers account for the GST in their GST/HST returns according to the normal rules.

When more than 10% of the service is performed on or after July 1, 2010

The following rules apply when more than 10% of a service is performed on or after July 1, 2010:

• Regardless of when the service is performed, GST applies to any amount that becomes due or is paid without having become due on or before October 14, 2009.
• Regardless of when the service is performed, GST applies to any amount that becomes due or is paid without having become due after October 14, 2009 and before May 2010. However, certain purchasers have to self-assess the provincial part of the HST. For more information, refer to "Self-assessment of provincial part of the HST" in this info sheet.
• When an amount becomes due or is paid without having become due on or after May 1, 2010:
  • GST applies to any amount that relates to the portion of the service performed before July 2010; and
  • HST applies to any amount that relates to the portion of the service performed on or after July 1, 2010.

Accounting for the GST/HST charged on services

The previous rules explained whether GST or HST applies to a service. 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 the 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 information, refer to "Self-assessment of provincial part of the HST" in this info sheet.

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

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

When HST applies to a service or a portion of a service, 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 its 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

Combination of property and services

The following rule applies to any combination of property or services supplied together as a single supply where one of the items is property that would not be subject to HST if it were supplied separately.

In this case, the property is considered to have been sold separately from the other items but only for the purposes of determining whether GST or HST applies during the period that includes July 1, 2010.

For information on the general transitional rules for sales of goods in Ontario and British Columbia during the period that includes July 1, 2010, refer to GST/HST Info Sheet GI-070, Ontario and British Columbia: Transition to the Harmonized Sales Tax – Goods.

Self-assessment of provincial part of the HST

Certain non-consumers have to self-assess the provincial part of the HST when they purchase a service to be performed on or after July 1, 2010 and an amount for the service becomes due or is paid without having become due after October 14, 2009 and before May 2010.

Therefore, this rule applies to a person that is a sole proprietor, a business, an organization, a public service body, or any other entity.

A non-consumer that purchases a service must self-assess the provincial part of the HST if the non-consumer:

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

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

• on line 405 of its GST/HST return for the reporting period that includes July 1, 2010 if the due date for that 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 A – Transitional rules for services

The following illustrates the general transitional rules for services performed during the period that includes July 1, 2010.

Appendix B – 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 an 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.