Harmonized Sales Tax

As of July 1, 2010, Ontario harmonized its retail sales tax with the GST to implement the HST at the rate of 13% and British Columbia harmonizedW its provincial sales tax with the GST to implement the HST at the rate of 12%. Also, as of July 1, 2010, Nova Scotia increased its HST rate from 13% to 15%.

HST refers to Harmonized Sales Tax. In certain provinces of Canada like Newfoundland and Labrador, New Brunswick, and Nova Scotia the Harmonized Sales Tax (HST) merge the Goods and Services Tax with Provincial Sales Tax to form a singular sales tax.

The earliest attempt to create a Harmonized Sales Tax took place in Saskatchewan almost immediately after the Goods and Services tax was introduced in the year 1991. This was mainly done to make collection of tax more easy and convenient for merchants. However, the attempt at harmonization did not prove to be that popular.

Thus the HST was seen as some kind of tax grab. The government made a promise for reversing the harmonization. In 1996, Nova Scotia, Newfoundland and Labrador, and New Brunswick agreed to create a new form of Harmonized Sales tax. To make this form of tax little popular with people the provinces lowered their rate of sales tax to 8%. This resulted in 15% cumulative tax when 7% of federal tax was included. This new form of tax was effective from April 1, 1997.

Canada revenue Agency collects the HST and thereafter distributes the required amounts to the different provinces. In the year 2009, HST is effective in the three provinces where it was originally introduced. All other provinces still retain separate PST and GST with the exception of Alberta where there is no system of charging PST. There are other intricate complications associated with having different legislation at the provincial and federal levels.

In case of certain goods GST is applied, but not PST or the condition is reversed in other category of goods. Quebec and Prince Edward Island apply the PSTs on the GST. Thus although there are certain obvious benefits associated with simplifying the entire sales tax collection, there also exists a great deal of confusion which a system of single comprehensive tax (HST) cannot fully handle.

The GST/HST rates are as follows:

On or after July 1, 2010 On or after January 1, 2008, and before July 1, 2010 Before January 1, 2008, and after June 30, 2006 On or after April 1, 1997, and before July 1, 2006 Before April 1, 1997
Alberta 5% 5% 6% 7% 7%
British Columbia 12% 5% 6% 7% 7%
Manitoba 5% 5% 6% 7% 7%
New Brunswick 13% 13% 14% 15% 7%
Newfoundland and Labrador 13% 13% 14% 15% 7%
Northwest Territories 5% 5% 6% 7% 7%
Nova Scotia 15%* 13% 14% 15% 7%
Nunavut 5% 5% 6% 7% 7%
Ontario 13% 5% 6% 7% 7%
Prince Edward Island 5% 5% 6% 7% 7%
Saskatchewan 5% 5% 6% 7% 7%
Yukon 5% 5% 6% 7% 7%

The HST breakdown:

  • The HST rate of 12% includes the 5% federal part and 7% provincial part.
  • The HST rate of 13% includes the 5% federal part and 8% provincial part.
  • The HST rate of 15%* includes the 5% federal part and 10% provincial part.
    (As of July 1, 2010)
  • The HST rate of 14% includes the 6% federal part and 8% provincial part.
  • The HST rate of 15% includes the 7% federal part and 8% provincial part.

Almost everyone has to pay the GST/HST on purchases of taxable supplies of property and services (other than zero-rated supplies). A limited number of sales or supplies are exempt from GST/HST.

Although the consumer pays the tax, businesses are generally responsible for collecting and remitting it to the government. Businesses that are required to have a GST/HST registration number are called registrants.

Registrants collect the GST/HST on most of their sales and pay the GST/HST on most purchases they make to operate their business. They can claim an input tax credit, to recover the GST/HST paid or payable on the purchases they use in their commercial activities.

GST/HST registrants must meet certain responsibilities. Generally, they must file returns on a regular basis, collect the tax on taxable supplies they make in Canada, and remit any resulting net tax owing.