Sales Taxes -> GST/HST -> What are GST and HST?
What are GST and HST?
GST, or goods and services tax, is a sales tax which is charged on most goods and services sold in Canada. In many provinces, the GST has been "harmonized" with the provincial sales tax, to become harmonized sales tax, or HST. For information on sales tax rates in each province and territory, see our tables of sales tax rates (link at bottom of page).
Any business which is registered to collect GST/HST will be able to recover GST/HST paid on purchases made in the course of their commercial activities, by claiming "input tax credits" when filing their GST returns. Usually the input tax credits will be for 100% of the GST or HST incurred on supplies for your commercial activities. Input tax credits cannot be claimed if they relate to purchases made in order to provide exempt supplies (see RC4022 at bottom). In most cases of GST or HST on meals and entertainment expenses, only 50% of the GST/HST can be recovered, and the other 50% is not a deductible expense. See the link at bottom of page for more information.
Section 168(1) of the Excise Tax Act says, re GST/HST: "Tax under this Division in respect of a taxable supply is payable by the recipient on the earlier of the day the consideration for the supply is paid and the day the consideration for the supply becomes due."
Thus, for both the seller and the buyer, normally the GST/HST is recorded on the invoice date, or earlier if the invoice is paid prior to the invoice date. In the case of a lease, it would be recorded on the due date of the lease payment as per the lease agreement, unless the lease payment is paid prior to the due date.
GST/HST on Forgiven or Deferred Commercial Rents
With the COVID-19 pandemic, some landlords may be forgiving or deferring commercial rents for their tenants. GST/HST applies to commercial rents.
If rent is deferred to a later date, it should still be recorded by both the landlord and the tenant on the due date indicated in the lease agreement, including the GST/HST portion of the rent. It is a receivable for the landlord and a payable for the tenant on the due date of the lease payment. Although the GST/HST isn't being collected yet, the landlord would still have to remit it, and the tenant can recover it based on the due date. If the wording of the lease is revised to change payment amounts and due dates, then the GST/HST would be recorded and remitted, and ITCs claimed, based on the revised due dates.
If a landlord is forgiving the rent for their commercial tenant, this should be put in writing to eliminate the need for recording and remitting the GST/HST.
GST/HST Rate Changes
Both Ontario and BC implemented the HST, effective July 1, 2010. Ontario's HST rate is 13%, while BC's rate was 12%. However, BC returned to a PST and GST system on April 1, 2013. See Ontario HST and BC HST for more information.
Nova Scotia increased their HST rate to 15%, effective July 1, 2010. Canada Revenue Agency (CRA) has issued the following publications:
GST Rate Reduction Effective January 1, 2008
The GST rate was reduced from 6% to 5% effective January 1, 2008. The HST rate was reduced from 14% to 13%. Since then, of course, other provinces have implemented HST - see the table of sales tax rates in each province (above) for current rates. See the following CRA web pages regarding the rate reduction:
Effective July 1, 2006 to December 31, 2007
The GST rate was reduced from 7% to 6% effective July 1, 2006. The HST rate was reduced from 15% to 14%.
TaxTips.ca Related Articles
Canada Revenue Agency (CRA) Resources
re Input Tax Credits
Revised: September 22, 2023
Revised: September 22, 2023
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