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HST Transition Rules for May 2010

HST TRANSITION RULES THAT TAKE EFFECT MAY 1ST.

The transition rules that take effect May 1, 2010 are intended to avoid both PST and (provincial portion of) HST being charged on the same payment for goods and services.  In other words, to prevent the consumer from being charged 7% PST and 12% HST. 

The core of HST transition rules is based on “transfer of ownership”. 

When goods or services are transferred and an invoice is submitted, there is a transfer of ownership.   If an immediate transfer of ownership does not occur and, in fact, occurs over time (a lease, building construction, prepayment for goods) there needs to be transition rules to prevent confusion and ensure consistency.

May 1st transition rule:

Consumers purchasing goods and services that will be provided on or after July 1, 2010, or entering into leases on or after July 1, 2010, will start seeing HST on their invoices or bills for these as of May 1, 2010. 

In other words, as of May 1st, if you sign up for a lease or agree to purchase goods or services and the agreement doesn’t begin or the goods aren’t delivered until July 1, 2010, your agreement still has to be based on HST. This makes sense as it not only prevents double taxation (confusion as to what to charge when the goods finally arrive) but it prevents tax avoidance (people purposely purchasing goods and services but delaying delivery and payment). 

www.sbr.gov.bc.ca/documents_library/notices/HST_Notice_001.pdf

www.cra-arc.gc.ca/tx/pstr/trnstnl/menu-eng.html

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