GST

Introduction
Most goods and services consumed in Canada are subject to the federal Goods and Services Tax(GST). Commencing January 1st 2008, this rate changed to 5%. Registered suppliers are required to charge and collect GST from the consumer or purchaser. The University is required to pay the tax to the supplier when the invoice becomes due.

FAQ's about GST Rebate Change

Rebates
The rebate percentage remained the same with the GST change to 5% on January 1st. The University is eligible to receive a rebate of 67% of the 5% tax (3.35%) paid on purchases. Only the net amount, 33% of the 5% (1.65%), is ultimately charged to departmental funds.

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Purchases from Canadian Suppliers

The majority of Canadian suppliers are registered to collect GST and must charge GST on taxable transactions. Their GST number must appear on their invoices. Unless the purchase qualifies as an exemption, 5% GST will be charged by the supplier on the purchase amount and will be paid by the University.

Small suppliers, defined by government regulations as businesses whose annual sales do not exceed $30,000, are not required to register their business for GST purposes. They may opt to register in which case they are required to include their GST number on all invoices and to collect GST from purchasers. If a small supplier is not registered, they cannot charge GST and no GST is paid by the University.

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Non-taxable Goods (Zero-Rated Items)

The government has exempted certain goods from GST. Goods within this classification are generally limited to use within specific areas. Some of the more common goods include:

  • agricultural products and farm livestock
  • basic groceries
  • medical devices
  • prescription drugs and drug dispensing fees
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Imports from Foreign Suppliers

The Goods and Services Tax applies to the consumption of goods and services in Canada; therefore, imported goods and services will be subject to GST. The tax on goods will be paid to Canada Customs at the time of import and the net amount, after rebate, will be charged to your department. The University is required to do self-assessing on imported services and intangible property.

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Non-taxable Importations

Exemption of GST has been extended to the importation of the following goods:

  • goods donated to the University at no charge
  • goods imported for the sole purpose of public exhibit by the University
  • goods sent by mail or courier valued at $20 or less (Canadian funds), but excluding books and
  • periodicals or magazines obtained by subscription
  • non-taxable goods (zero-rated items)
  • warranty replacement parts supplied at no charge 
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Self-assessing GST on the Importation of Services and Intangible Property

Imported services and intangible property cannot be practically taxed at the border by Canada Customs. The University is required to self-assess and remit the GST to Revenue Canada on these purchases.

Some foreign suppliers have registered with the Canadian government and charge GST. They are required to include their GST number on their invoices. If the foreign supplier is not registered, they cannot collect GST. In these cases, Accounts Payable will calculate the tax owing and charge your department the net amount after the rebate.

Imported services and intangible property include:

  • contractual rights
  • intellectual property (architect fees, consultant fees, patents, professional performance fees, speaker fees, trademarks, trade names)
  • service contracts for equipment
  • software license agreements
  • subscriptions for periodicals or magazines (remit on cost of subscription)
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Frequently Asked Questions about GST Rebate Changes

Membership Fees, Ticket Sales and Subscriptions:

If the membership, ticket sale or subscription is paid or invoiced prior to January 1st, 2008 GST will be charged at 6% regardless of when the supply will actually be used or received. Thus if you issue an invoice dated December 1st, 2007 for a gym membership covering January 1st, 2008 to December 31st, 2008, GST is to be charged at 6% since the invoice was dated prior to January 1st, 2008.


Contract with a partial payment.

Q: We signed a contract and made a partial payment for services that will not take place until after January 1st . The invoice for the services will be issued after January 1st. What rates of tax apply?

A: The partial payment will have the rate of 6% GST applied as payment was made prior to January 1st. The balance of the contract will have 5% GST as the invoicing for these services occurs after January 1st.


Payment Terms

Q: An invoice is generated on December 15th with payment terms of 30 days – what is the tax payable?

A: Since the date when tax became payable (i.e. the invoice date) is prior to January 1st, the 6% GST rate applies. The earlier of the invoice date to the date when payment is due (i.e. January 15th) is the data to which the taxation is applied.


Post dated cheques were issued with 6% GST, for a service being delivered in 2008

Q: If post-dated cheques have been sent for a service that continues into 2008, what happens to the cheques issued prior to January 1st, that used a GST rate of 6%?

A: The payment was made prior to January 1st (i.e. physically issuing the cheque), however the rate that applies when cashing the cheque (i.e. for cheques dated after January 1st 2008) is 5%. The recipient of the cheque is only obligated to pay 5% for cheques dated after January 1st 2008, so you may get a credit for the GST overpayment. The supplier is not under any obligation to calculate a rebate, however a credit note may be issued by the supplier