What is an Harmonized Sales Tax?

The Goods and Services Tax (GST) combined with the Provincial Services Tax (PST) is called as the Harmonized Sales Tax. This system of combined tax collection is deployed in Canada. Shortly after GST was introduced in 1991, the concept of Harmonized Sales Tax was attempted in Saskatchewan. As of 2009, the 3 Atlantic Provinces of Newfoundland and Labrador, New Brunswick and Nova Scotia have agreed with the federal government to implement the Harmonized Sales Tax. The Canada Revenue Agency collects the HST and then remits the amount to the provinces who have agreed to implement the HST.

As of January 2008 the General Sales Tax was lowered to 5% compared to 10% a few years back, thus resulting in a net HST of 13%. Although the concept of HST is currently employed only in three provinces of Canada, the state of Ontario on March 26, 2009 announced its intentions to combine the PST and GST from July 1, 2010.

HST has to be paid on purchases of goods and services that are taxable. Certain sales and supplies however are exempted from Harmonized Sales Tax. The registrants of HST can claim a credit called as Input Tax Credit to recover the HST on purchases that the registrants used in commercial activities.

An individual has to register for GST when he/she no longer would qualify as a small supplier. A small supplier is one whose taxable amount of goods doesn’t exceed $30,000 per quarter. On being a taxi/limousine driver whose fares are regulated by the federal or provincial laws, you have to register for HST even if your revenues do not cross the $30,000 mark.

For the Construction Industry as of January 1, 2008, the net Harmonized Sales Tax rate was reduced from the previous 14% to 13%. One can register simultaneously for both the Business Number and one or more Canada Revenue Agency Accounts. Registration via Telephone: 1-800-959-5525

The annual sale is the parameter that determines how many times in a year one has to pay the HST. This is referred to as the Reporting Period. This reporting period is based on the sum of annual taxable supplies of services and goods, annual taxable supplies of all your associates and zero rated supplies of goods and services.

An individual whose reporting period is monthly or quarterly must file their Harmonized Sales Tax returns no later than a month after the end of the reporting period. Individuals with annual reporting period must file their Harmonized Sales Tax returns no later than three months after the end of the fiscal year. Individuals, who are annual filers with business income for income tax purposes with a December 31 fiscal year end, have to file their HST returns by June 15th. However the net HST amount that you owe must be remitted by April 30th. A rebate amount after filing the HST can be received only on filing all returns of your applicable business programs under the Income Tax Act (ITA), the Air Travellers Security Charge Act, the Excise Act (2001) and the Excise Tax Act (ETA).

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