Ontario and British Columbia: Transition to the Harmonized Sales Tax – Goods

GST/HST Info Sheet GI-070
July 2010

This info sheet explains whether the goods and services tax (GST) or the HST applies to the following supplies made during the period that includes the July 1, 2010 implementation date of the HST in Ontario and British Columbia:

• sales of goods;
• sales of a combination of goods and services;
• sales of periodical publications by subscription; and
• leases and licences of goods.

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.

Most of the transitional rules explained in this info sheet are based on the earlier of when an amount becomes due and when an amount is paid without having become due. Appendix A to this info sheet contains information on that subject.

Sales of goods

To determine whether GST or HST applies to goods sold during the period that includes July 1, 2010 (other than subscriptions to periodical publications), suppliers must consider:

• when the goods are delivered to the purchaser;
• when ownership of the goods is transferred to the purchaser;
• when an amount for the goods becomes due; and
• whether an amount is paid without having become due.

When goods are delivered or ownership is transferred before July 2010

When a good is delivered, or ownership is transferred, to a purchaser before July 2010, only the GST applies to any amount that becomes due or is paid without having become due.

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, to the purchaser on or after July 1, 2010:

• GST applies to any amount that becomes due or is paid without having become due on or before October 14, 2009.
• 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".
• HST applies to any amount that becomes due or is paid without having become due on or after May 1, 2010.

Appendix B to this info sheet contains a chart that illustrates the general transitional rules for sales of goods when the goods are delivered, and ownership is transferred, to the purchaser on or after July 1, 2010.

For information on returns and exchanges of goods and on goods supplied on a continuous basis, such as electricity, refer to the following GST/HST Info Sheets:

• GI-075, Ontario and British Columbia: Transition to the Harmonized Sales Tax – Returns and Exchanges of Goods; and
• GI-076, Ontario and British Columbia: Transition to the Harmonized Sales Tax – Continuous Supplies and Budget Payment Arrangements.

Combination of goods, property and/or services

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

In this case, the good 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 services performed in Ontario and British Columbia during the period that includes July 1, 2010, refer to GST/HST Info Sheet GI-056, Ontario and British Columbia: Transition to the Harmonized Sales Tax – Services.

For information on the general transitional rules for sales of intangible personal property in Ontario and British Columbia during the period that includes July 1, 2010, refer to GST/HST Info Sheet GI-059, Ontario and British Columbia: Transition to the Harmonized Sales Tax – Intangible Personal Property.

Subscriptions to periodical publications

The following rules apply to subscription sales of newspapers, magazines or other periodical publications:

• GST applies to an amount paid before July 2010; and
• HST applies to an amount paid on or after July 1, 2010.

Leases and licences of goods

The following rules apply to goods supplied by way of lease, licence or similar arrangement, the consideration for which is rent, royalties or similar payments. They also apply to leases and licences of intangible personal property where payments vary with the amount of use or profits from the property.

To determine whether GST or HST applies to leases of goods, suppliers must consider:

• the lease interval;
• when an amount becomes due for that lease interval; and
• whether an amount is paid without having become due for that lease interval.

A "lease interval" is the period of time to which a periodic payment is attributable under a lease.

When a lease interval begins before July 2010 and ends before July 31, 2010

When a lease interval begins before July 2010 and ends before July 31, 2010, only the GST applies to any amount that becomes due or is paid without having become due for that lease interval.

When a lease interval begins before July 2010 and ends on or after July 31, 2010

The following rules apply when a lease interval begins before July 2010, and ends on or after July 31, 2010:

• GST applies to any amount that becomes due or is paid without having become due on or before October 14, 2009.
• 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 any amount that relates to the portion of the lease interval that occurs before July 2010; and
  • HST applies to any amount that relates to the portion of the lease interval that occurs on or after July 1, 2010.

Appendix C to this info sheet contains a chart that illustrates the general transitional rules for leases of goods when a lease interval begins before July 2010, and ends on or after July 31, 2010.

When a lease interval begins on or after July 1, 2010

The following rules apply when a lease interval begins on or after July 1, 2010:

• GST applies to any amount that becomes due or is paid without having become due on or before October 14, 2009.
• 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".
• HST applies to any amount that becomes due or is paid without having become due on or after May 1, 2010.

Accounting for the GST/HST charged on sales and leases of goods

The previous rules explained whether GST or HST applies to sales and leases of goods. The following rules explain who accounts for the tax and when it should be accounted for. The following rules do not apply to subscription sales of periodical publications which follow the normal reporting rules.

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

Self-assessing the provincial part of the HST

Certain purchasers that are non-consumers have to self-assess the provincial part of the HST when:

• the goods they purchase are delivered and ownership is transferred on or after July 1, 2010, and an amount for the goods becomes due or is paid without having become due after October 14, 2009 and before May 2010;
• a lease interval begins before July 2010, and ends on or after July 31, 2010, and an amount for that lease interval becomes due or is paid without having become due after October 14, 2009 and before May 2010; or
• a lease interval begins on or after July 1 2010, and an amount for that lease interval becomes due or is paid without having become due after October 14, 2009 and before May 2010.

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

• does not purchase the supply for consumption, use or supply exclusively (90% or more) in its commercial activity;
• is using a simplified accounting method to calculate its net tax;
• is purchasing a supply that is subject to input tax credit (ITC) recapture of the provincial part of the HST or ITC restriction (such as the ITC restriction for leased passenger vehicles where the monthly lease payment exceeds $800);
• 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 the 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 – 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, apply the HST on the final amount or on the total amount payable for the supply.

Appendix B – Transitional rules for sales of goods when the goods are delivered and ownership is transferred to the purchaser on or after July 1, 2010

The following illustrates the transitional rules for sales of goods (other than sales of subscriptions to periodical publications) when the goods are delivered and ownership is transferred to the purchaser on or after July 1, 2010.

Appendix C – Transitional rules for leases of goods

The following illustrates the transitional rules for leases of goods when a lease interval begins before July 2010 and ends on or after July 31, 2010.