When should I start using the new HST codes for the July 1 change?

 

On July 1, 2010, the provinces of Ontario and BC will change over to the new HST. However, there are situations where you may have to charge HST before July 1, 2010. The CRA created transitional rules that explain when you need to charge the HST for transactions that straddle the July 1 date. 

Watch videos created by CRA for more information on transitional rules.


Some examples of transitional rules

Here are a few examples of the transitional rules that may affect small businesses. However, we highly recommend that you familiarize yourself with all the transitional rules so you know which transactions should be charged HST before July 1 . Read the transitional rules on the CRA website here.

Transitional Rule Example

Sales of Goods
HST applies when goods are delivered and ownership is transferred on or after July 1 and consideration becomes due or is paid without having become due on or after May 1.

 You sell and collect payment for a sofa on May 5 and deliver it to your customer on July 10

Exchanges & Returns of Goods
Special rules apply to exchanges made on or after July 1, 2010 and before November 1, 2010 for goods purchased before July 1, 2010.

  • exchanged good exceeds the original cost of the good, then apply HST to the difference
  • exchanged good is less than or equal to original cost of good, do NOT apply HST

On May 5, you sell a sofa and deliver it to your customer on June 15, 2010. On July 2, 2010, the sofa is returned and exchanged for a sofa costing $100 more. You would apply HST to the $100 difference.

If the sofa returned and exchanged for a sofa costing less than the original price, you would NOT charge any HST.

After Nov. 1, 2010, all goods returned and exchanged would have HST applied.
Services - General Rule
HST would apply to any consideration due or paid on or after May 1, 2010, for a supply of a service, when the consideration related to the portion of the service is performed on or after July 1, 2010

You provide a service for your customer in the months of June and July. 50% of the service in June and 50% in July. You don't invoice the customer until August.

You would apply GST for the June charges, and HST to the July charges.

Supply & Install Contracts
A special rule applies where property and or services are supplied together as one supply.

If ownership or possession is transferred to a recipient before July 2010, and that property would not be subject to the HST under the general transitional rules if it were supplies separately, the supply of that property would be deemed to be a separate supply from the service or other property.

You sell home theatre equipment to a customer on June 5, 2010. Installation of the equipment in the customers' home is part of the supply. The equipment is delivered to the customer on June 30, 2010 and installed on July 5, 2010.

HST does not apply to the home theatre equipment since the equipment was delivered to the customer before July 2010.

But HST does apply to the install service since the service was done on or after July 1, 2010.


 

Courtesy Intuit Canada 2010
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