Transitional rules for HST
General rules
HST will not apply to consideration that became due on or before October 14, 2009.
Consideration due or paid on or after July 1, 2010
The HST would generally apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.
Consideration due or paid on or after May 1, 2010 and before July 2010
The HST would generally apply to consideration that becomes due, or is paid without having become due, on or after May 1, 2010 and before July 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.
In such circumstances, the supplier would be required to account for the Ontario component of the HST in the GST/HST reporting period of the supplier that includes July 1, 2010. The recipient of the supply would be able to claim any available input tax credits with respect to the Ontario component of the HST in the GST/HST reporting period of the recipient that includes July 1, 2010.
Consideration due or paid after October 14, 2009 and before May 2010
Persons who are not consumers — such as businesses and public service bodies — may be required to self-assess the Ontario component of the HST on consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010. The requirement to self-assess in these circumstances would generally apply only to:
1. non-consumers acquiring the goods for consumption, use or supply otherwise than exclusively in the course of their commercial activities (e.g., a business, that is acquiring the goods to make GST/HST-exempt supplies);
2. non-consumers acquiring the goods for consumption, use or supply exclusively in the course of their commercial activities but in circumstances where the goods would be subject to an input tax credit restriction or recapture;
3. non-consumers that use simplified procedures available under the ETA for calculating their net tax; and
4. selected listed financial institutions, which use a special attribution method in determining their net tax.
General rules for specific goods and services
Subscriptions to newspapers, magazines or other periodical publications
Notwithstanding the general transitional rules, HST will not apply to consideration paid before July 1, 2010 for a subscription to a newspaper, magazine or other periodical publication.
Services
The HST will generally apply to services performed on or after July 1, 2010.
Where services straddle July 1, 2010, the supplier of such services would have to apportion part of the payment that would be subject to the HST. The HST will generally not apply to a service if all or substantially all (90 percent or more) of the service is performed before July 2010.
Special rules apply for funeral and cemetery services, passenger transportation services and freight transportation services.
Leases and licences
The HST will generally apply to a supply of property by way of lease, licence or similar arrangement for the part of the lease interval that occurs on or after July 1, 2010. This rule will apply to leases, licences or similar arrangements for supplies of property such as goods, intangible personal property, and commercial real property.
A person making such supplies for a period that straddles July 1, 2010 would have to apportion part of the payment that would be subject to the HST. However, HST will not apply to a supply of property by way of lease, licence or similar arrangement if the lease interval begins before July 2010 and ends before July 31, 2010. For example, a car lease payment for the period June 15, 2010 to July 14, 2010 would not be subject to HST.
Intangible personal property
For sales of intangible personal property (such as intellectual property or contractual rights), the HST will generally apply to consideration that becomes due or is paid on or after July 1, 2010.
Memberships
A supply of a membership in a club or association would be deemed to be a supply of a service for purposes of the transitional rules and would therefore follow the transitional rules for a service.
In the case of lifetime memberships, if consideration for a lifetime membership in a club, organization or association becomes due, or is paid, after October 14, 2009 but before July 2010, and that consideration exceed 25% of the total consideration for the lifetime membership, the amount in excess of the 25% portion would be treated as becoming due on, and not to have been paid before, July 1, 2010 and would be subject to the HST.
Admissions
A supply of an admission to a place of amusement, a seminar, an event or an activity would be deemed to be a supply of a service for purposes of the transitional rules and would therefore follow the transitional rules for a service.
Passenger transportation passes
HST would generally apply to consideration that becomes due, or is paid, after October 14, 2009 for a supply of a passenger transportation pass that entitles an individual to passenger transportation services during a certain period (the pass period), to the extent that the consideration is for the part of the pass period that occurs on or after July 1, 2010. HST would not apply to a supply of a transportation pass if the pass period begins before July 1, 2010 and end before August 2010.
Real property (other than residential housing)
For sales of real property (other than residential housing), the HST will generally apply if both ownership and possession of the property are transferred to the purchaser on or after July 1, 2010.
Residential real property contracts (other than the sale of new homes)
A rebate will be available for RST that contractors have paid on construction materials purchased before July 1, 2010 where those materials are held in inventory at the end of the day on June 30, 2010 and subsequently used in residential property contracts to which HST would apply.
Other transitional rules
Specific transitional rules also apply for direct sellers, budget payment arrangements, continuous supplies, combined supplies, and progress payments/holdbacks. The Ontario releases also discuss the application of the HST on property and services brought into or imported in the provinces.
- Introduction of the Harmonized Sales Tax (HST) in Ontario
- Transitional rules for HST
- Winding down the Retail Sales Tax (RST)
- Temporary ITC Restrictions for Large Business
- Harmonized Sales Tax Checklist
- Retail Sales Tax Clearance Certificates
- Retail Sales Tax – Final, Supplemental and Amended Returns
- Retail Sales Tax Transitional Tax Rebate
- Contact Us
Articles on HST from our Accounting Blog
ITC Restrictions and Production Proxy
Special Report on Harmonized Sales Tax (HST) in Ontario
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