Prince Edward Island: Transition to the Harmonized Sales Tax – Goods

GST/HST Info Sheet GI-160
March 2013

This info sheet explains whether the goods and services tax (GST) or the HST would apply to the following taxable supplies made in Prince Edward Island during the period that includes the proposed April 1, 2013, implementation date for the HST in Prince Edward Island:

• sales of goods;
• sales of a combination of goods and services;
• sales of subscriptions to periodical publications; and
• leases and licences of goods.

For information on determining whether a supply is made in Prince Edward Island, refer to Draft GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province.

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-161, Prince Edward Island: Transition to the Harmonized Sales Tax – Returns and Exchanges; and
• GI-162, Prince Edward Island: Transition to the Harmonized Sales Tax – Continuous Supplies and Budget Payment Arrangements.

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. Refer to Appendix A for information on this subject.

Sales of goods

To determine whether GST or HST would apply to goods (other than subscriptions to periodical publications) sold during the period that includes the proposed April 1, 2013, implementation date for the HST in Prince Edward Island, suppliers would have to consider:

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

When goods are delivered or ownership is transferred before April 2013

When a good is delivered or ownership is transferred to a purchaser before April 2013, only the GST would apply to any amount that becomes due or is paid without having become due for the good. Suppliers would account for the GST in their GST/HST returns according to the normal rules.

When goods are delivered and ownership is transferred on or after April 1, 2013

The following rules apply when a good is delivered and ownership is transferred to the purchaser on or after April 1, 2013:

• GST would apply to any amount that becomes due or is paid without having become due on or before November 8, 2012.
• GST would apply to any amount that becomes due or is paid without having become due after November 8, 2012, and before February 2013. However, certain purchasers would have to self-assess the 9% provincial part of the HST. For more information, refer to "Self-assessing the provincial part of the HST".
• HST would apply to any amount that becomes due or is paid without having become due on or after February 1, 2013.

Refer to Appendix B for a flowchart that illustrates the general transitional rules that would apply for sales of goods when the goods are delivered and ownership is transferred to the purchaser on or after the proposed April 1, 2013, implementation date for the HST in Prince Edward Island.

Combination of property and services

The following rule would apply 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 (e.g., a good) would be considered to have been sold separately from the other items but only for the purposes of determining whether GST or HST would apply during the period that includes the proposed April 1, 2013, implementation date for the HST in Prince Edward Island.

For information on the general transitional rules for services performed during that period, refer to GST/HST Info Sheet GI-135, Prince Edward Island: Transition to the Harmonized Sales Tax – Services.

For information on the general transitional rules for sales of intangible personal property, refer to GST/HST Info Sheet GI-136, Prince Edward Island: Transition to the Harmonized Sales Tax – Intangible Personal Property.

Subscriptions to periodical publications

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

• GST would apply to an amount paid before April 2013; and
• HST would apply to an amount paid on or after April 1, 2013.

Suppliers would account for the GST/HST on their sales of subscriptions to periodical publications in their GST/HST returns according to the normal rules.

Leases and licences of goods

The following rules would 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 would apply to leases of goods, suppliers would have to 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 April 2013 and ends before May 2013

When a lease interval begins before April 2013 and ends before May 2013, only the GST would apply to any amount that becomes due or is paid without having become due for that lease interval. Suppliers would account for the GST in their GST/HST returns according to the normal rules.

When a lease interval begins before April 2013 and ends on or after May 1, 2013

The following rules would apply when a lease interval begins before April 2013 and ends on or after May 1, 2013:

• GST would apply to any amount that becomes due or is paid without having become due on or before November 8, 2012.
• GST would apply to any amount that becomes due or is paid without having become due after November 8, 2012, and before February 2013. However, certain purchasers would have to self-assess the 9% provincial part of the HST. For more information, refer to "Self-assessing the provincial part of the HST".
• When an amount becomes due or is paid without having become due on or after February 1, 2013:
  • GST would apply to any amount that relates to the portion of the lease interval that occurs before April 2013; and
  • HST would apply to any amount that relates to the portion of the lease interval that occurs on or after April 1, 2013.

Refer to Appendix C for a flowchart that illustrates the general transitional rules that would apply for leases of goods when a lease interval begins before April 2013, and ends on or after May 1, 2013.

When a lease interval begins on or after April 1, 2013

The following rules would apply when a lease interval begins on or after April 1, 2013:

• GST would apply to any amount that becomes due or is paid without having become due on or before November 8, 2012.
• GST would apply to any amount that becomes due or is paid without having become due after November 8, 2012, and before February 2013. However, certain purchasers would have to self-assess the 9% provincial part of the HST. For more information, refer to "Self-assessing the provincial part of the HST".
• HST would apply to any amount that becomes due or is paid without having become due on or after February 1, 2013.

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

The previous rules explained whether GST or HST would apply to sales and leases of goods. The following rules explain who would account for the tax, and when it would be accounted for:

• in the case of sales, when ownership and possession of the good transfer on or after April 1, 2013; and
• in the case of leases, when the lease interval begins on or after April 1, 2013, or when it ends on or after May 1, 2013.

After November 8, 2012 and before February 2013

When an amount becomes due or is paid without having become due after November 8, 2012, and before February 2013, the supplier would charge the purchaser GST and would account for the GST in its GST/HST return according to the normal rules. Certain purchasers would have to self-assess the 9% provincial part of the HST. For more information, refer to "Self-assessing the provincial part of the HST".

On or after February 1, 2013 and before April 2013

When an amount becomes due or is paid without having become due on or after February 1, 2013, and before April 2013, the supplier would account for the tax in the following manner:

• When GST would apply to a sale of a good or a portion of a lease interval that occurs before April 2013, the supplier would account for the GST in its GST/HST return according to the normal rules.
• When HST would apply to the sale of a good or a portion of a lease interval that occurs on or after April 1, 2013, the supplier would account for:
  • the 5% federal part of the HST in its GST/HST return according to the normal rules; and
  • the 9% provincial part of the HST in its GST/HST return for the reporting period that includes April 1, 2013. The purchaser or lessee, if a registrant, would be able to claim any eligible input tax credit in respect of the 9% provincial part of the HST in its GST/HST return for the reporting period that includes April 1, 2013.

On or after April 1, 2013

When an amount becomes due or is paid without having become due on or after April 1, 2013, the supplier would account for the GST/HST in its GST/HST return according to the normal rules.

Self-assessing the provincial part of the HST

Certain persons who are non-consumers and who acquire goods by way of sale or lease would have to self-assess the 9% provincial part of the HST when an amount becomes due or is paid without having become due after November 8, 2012, and before February 2013 where:

• a good is delivered and ownership is transferred on or after April 1, 2013;
• a lease interval begins before April 2013 and ends on or after May 1, 2013; or
• a lease interval begins on or after April 1, 2013.

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

A non-consumer would have to self-assess the 9% provincial part of the HST if:

• the non-consumer does not acquire the good for consumption, use or supply exclusively (90% or more) in its commercial activity;
• the good is subject to an input tax credit (ITC) recapture (including if the good would be subject to a proposed temporary recapture of an ITC in respect of the 9% provincial part of the HST or ITC recapture for leased passenger vehicles where the monthly lease payment exceeds $800);
• the non-consumer is a GST/HST registrant using a simplified method to calculate its net tax (including the net tax calculation for charities); or
• the non-consumer is a GST/HST registrant selected listed financial institution.

The non-consumer would account for the 9% provincial part of the HST either:

• on line 405 of its GST/HST return for the reporting period that includes April 1, 2013, if the due date for that return is before August 2013; 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 August 2013.

All technical publications related to GST/HST are available on the CRA Web site at www.cra.gc.ca/gsthsttech.

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

An amount payable for a supply becomes due on the earliest of the following days:

• the date of an invoice for that amount;
• 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 purchaser is required to pay that amount under a written agreement.

Amount is paid without having become due

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

• before the date of an invoice, or before a supplier issues, or would have issued, the invoice; or
• before the purchaser is required to pay the amount under a written agreement and no invoice has been issued.

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 purchaser 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.

Appendix B – Transitional rules for sales of goods when the goods are delivered and ownership is transferred to the purchaser on or after April 1, 2013

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 April 1, 2013.

Appendix C – Transitional rules for leases of goods

The following illustrates the transitional rules for leases of goods when a lease interval begins before April 2013 and ends on or after May 1, 2013.