On April 1, 2013, the following will take place:
- British Columbia will replace its 12% HST with a combination of the 5% GST and the province’s 7% PST; and
- Prince Edward Island will implement the HST at 14%, replacing the 5% GST and the province’s 10% PST.
Looking at Canada from a macroscopic viewpoint, B.C., Saskatchewan and Manitoba will have combined hybrid GST/PST systems, whereas the eastern half of Canada (Ontario to P.E.I.) will have value-added tax systems (GST/HST/QST).
Re-introduction of the 7% PST in B.C.
There was little time to prepare for the changes, as detailed rules were released on February 28, 2013. Businesses operating in B.C. will need to:
- (if required) ensure the business is registered for the B.C. PST and that the 7% PST is charged on taxable goods and services; and
- update billing systems to ensure supplies made in B.C. are charged only the 5% GST instead of the 12% GST/HST previously charged.
In contrast to the GST/HST, which applies to all supplies made except those specifically listed as zero-rated or exempt, the PST will apply only to those goods and services listed as taxable supplies. Generally, sales of goods to end consumers will be subject to the PST while sales of goods to resellers and goods sold for manufacturing will not be taxable. Service providers will need to pay particular attention, as only certain types of service will now be subject to the PST. Examples of taxable services are legal services and services related to taxable goods. Most of the rules are similar to the previous Social Service Tax Act.
There are many other important details in the new B.C. sales tax structure. Contact your Collins Barrow advisor for more information.
Implementation of the 14% HST in P.E.I.
To prepare for the changes, businesses operating in P.E.I. will need to:
- update billing systems to ensure goods and services subject to the 5% GST are now charged the 14% HST; and
- ensure that no PST is charged for most supplies provided after April 1, 2013.
With the introduction of the 14% HST in P.E.I., more goods and services will be taxable than before under the PST. The change will generally be beneficial for businesses, as compliance will be simplified and the GST/HST paid on expenses can be recovered fully as input tax credits.
These changes will be much easier to implement. Several provinces have opted to piggy-back on the GST rules, so there is precedence, and the P.E.I. government has released much helpful information.
Altaf Sarangi, CA is a partner in the Toronto office of Collins Barrow.
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