Ontario and British Columbia: Transition to the Harmonized Sales Tax - Payment of the GST/HST by Ontario and B.C. Government Entities

GST/HST Info Sheet GI-073
May 2010

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

What is the GST/HST?

The GST/HST is a tax that applies to most supplies of property and services made in Canada. This includes supplies of tangible personal property (i.e., goods), real property, and intangible property such as trademarks, rights to use patents, digitizedproducts downloaded from the Internet and paid for individually, and options to purchase property.

Supplies of taxable property and services to Ontario and B.C. government entities

Under the sales tax harmonization agreements between the Governments of Ontario and British Columbia (B.C.) and the Government of Canada (i.e., the Canada-Ontario Comprehensive Integrated Tax Coordination Agreement and the Canada-B.C. Comprehensive Integrated Tax Coordination Agreement) both Ontario and B.C. have agreed that, effective July 1, 2010, all Ontario and B.C. government ministries, agencies, boards, commissions and Crown corporations ("Ontario and B.C. government entities") will pay GST/HST on the consideration for taxable supplies of property or services they acquire.

This means that, effective July 1, 2010, Ontario and B.C. government entities that are currently paying GST, as well as those that are currently claiming an exemption from GST (i.e., ministries and other provincial entities listed on Schedule A to the current Canada-Ontario or the Canada-B.C. Reciprocal Taxation Agreement (RTA) will pay GST/HST on the consideration for taxable supplies of property or services they acquire.

Accordingly, suppliers will generally charge GST/HST on any consideration that becomes due on or after July 1, 2010 in respect of taxable supplies of property or services to Ontario and B.C. government entities. In these cases, suppliers would not rely on or accept any Crown funds exemption requests or certifications requesting GST/HST relief at the point of sale.

Application of the general transitional rules for the Ontario and B.C. HST to Ontario and B.C. government entities

Non-Schedule A entities

Ontario and B.C. government entities that are currently paying GST on the consideration for taxable supplies of property or services they acquire (e.g., commercial Crown corporations) will be subject to the general transitional rules for Ontario and B.C. HST. In some circumstances, HST will apply to consideration that becomes due, or is paid without having become due, on or after May 1, 2010. Appendix A to this info sheet contains information on when an amount becomes due and when an amount is paid without having become due.

Because the Ontario Crown Corporation is not listed on Schedule A to the RTA, it is subject to the general transitional rules for the Ontario HST. In this case, under the general transitional rules for tangible personal property, HST will apply to the consideration for the supply of the photocopier because the consideration becomes due on or after May 1, 2010 and the photocopier is delivered and ownership is transferred, to the Ontario Crown Corporation on or after July 1, 2010. Therefore, the supplier of the photocopier charges HST on the consideration for the supply of the photocopier to the Ontario Crown Corporation.

Because the Crown Corporation is not listed on Schedule A to the RTA, it is be subject to the general transitional rules for the B.C. HST. In this case, under the general transitional rules for services, GST applies to the part of the consideration that becomes due on August 6, 2010 that relates to the portion of the service performed before July 2010, and HST applies to the part of the consideration that becomes due on August 6, 2010 that relates to the portion of the service performed on or after July 1, 2010. Therefore, in this case, the professional will charge GST on $800 ($2,000 × 40%) and HST on $1,200 ($2,000 × 60%) of the consideration for the supply of the service to the British Columbia Crown Corporation.

Schedule A entities

Ontario and B.C. government entities that are currently claiming an exemption from GST (i.e., Ontario and B.C. government entities listed on Schedule A to the RTA) will continue to claim an exemption from GST/HST until July 1, 2010.

GST/HST will not apply to any consideration that becomes due, or is paid without having become due, before July 1, 2010 in respect of supplies of taxable property and services to Ontario or B.C. government entities listed on Schedule A to the RTA. In these cases, suppliers will continue to accept Crown funds exemption requests and certifications requesting relief in respect of both GST and HST.

Because the Ontario ministry is listed on Schedule A to the RTA, and the consideration for the supply of the furniture is paid before July 1, 2010, the Ontario ministry will continue to claim an exemption from GST/HST. Therefore, the supplier does not charge GST/HST on the consideration for the supply of the furniture to the Ontario ministry. In this case, the supplier may accept the Ontario ministry's Crown funds exemption request or certification clause requesting relief from both the GST and the HST as the consideration for the supply was paid before July 1, 2010.

Because the British Columbia ministry is listed on Schedule A to the RTA, and the consideration for the supply of the service becomes due before July 1, 2010, the British Columbia ministry will continue to claim an exemption from GST/HST. Therefore, in this case, the professional would not charge GST/HST on the consideration for the supply of the service to the British Columbia ministry regardless of when the consideration is paid. In this case, the professional may accept the British Columbia ministry's Crown funds exemption request or certification clause requesting relief from both the GST and the HST as the consideration for the supply becomes due before July 1, 2010.

Ontario and B.C. government entities listed on Schedule A to the RTA will only be subject to the general transitional rules for Ontario and B.C. HST on any consideration that becomes due on or after July 1, 2010 (unless it was paid before that date) or is paid on or after July 1, 2010 without having become due, in respect of taxable supplies of property or services they acquire. In these cases, suppliers would not accept Crown funds exemption requests and certifications requesting HST relief.

Although the Ontario ministry is listed on Schedule A to the RTA, it is subject to the general transitional rules for Ontario HST because the consideration for the supply of the vehicle becomes due on or after July 1, 2010 (and was not paid before that date). In this case, under the general transitional rules for leases of goods, HST will apply to the consideration for the lease of the vehicle because the consideration becomes due on or after May 1, 2010 and the lease interval begins on or after July 1, 2010. Therefore, the supplier will be required to charge HST on the consideration for the lease of the vehicle to the Ontario ministry. A Crown funds exemption request or certification clause would not be accepted by the supplier.

Although the British Columbia ministry is listed on Schedule A to the RTA, it is subject to the general transitional rules for the B.C. HST because the consideration for the supply of the service becomes due on or after July 1, 2010 (and was not paid before that date). In this case, under the general transitional rules for services, GST will apply to the part of the consideration that becomes due on August 6, 2010 that relates to the portion of the service performed before July 2010, and HST will apply to the part of the consideration that becomes due on August 6, 2010 that relates to the portion of the service performed on or after July 1, 2010. Therefore, in this case the professional will be required to charge GST on $800 ($2,000 × 40%) and HST on $1,200 ($2,000 × 60%) of the consideration for the supply of the service to the British Columbia ministry. A Crown funds exemption request or certification clause would not be accepted by the professional.

As the first progress payment was made on June 1, the supplier does not charge GST/HST. The payments on July 1, and August 1, 2010 will be subject to the transitional rules for progress payments as the Province has agreed to pay tax effective July 1, 2010. The supplier will charge the GST on the July 1 payment as it is in respect of property delivered and services performed before July 1, 2010. The supplier will charge the HST on the August 1 payment as it is in respect of property delivered and services performed on or after July 2010. A Crown funds exemption request or certification clause should not be provided by the ministry or accepted by the supplier with respect to the July and August payments.

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 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 purchaser is required to pay that amount pursuant to 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.

The amount becomes due on April 15 because it is the earliest of the date of the invoice, the day the invoice was issued, and the day the client is required to pay an amount under a written agreement.

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; or
• before the client 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 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 - General application of transitional rules with respect to taxable supplies acquired by Ontario and British Columbia government entities

The following illustrates to suppliers the rules with respect to payments of the GST/HST by an Ontario or a British Columbia government entity that is the recipient of the supply.