Ontario Releases HST Transitional Rules
Proposed Measures Would Help Businesses and Consumers Prepare For Change
The McGuinty government has proposed general transitional rules that would assist in the move to a Harmonized Sales Tax (HST).
These rules explain:
- which tax would apply for transactions that straddle July 1, 2010 - the current Retail Sales Tax (RST) or the Ontario portion of the HST,
- how the RST would wind down, and
- the special transitional rules that would apply.
Overall, the HST would apply to goods and services purchased on or after July 1, 2010. In addition, consistent with the approach used in the Atlantic provinces and Quebec, the HST would generally apply to prepayments starting on May 1, 2010, for goods or services that would be provided on or after July 1, 2010. This would create a level playing field for consumers and provide clarity for businesses as they transition to the HST.
The transitional rules include some key measures:
- Funeral services - The HST would not apply to funeral services where the contract is entered into before July 1, 2010.
- Transitional RST inventory rebate for residential contracts - A rebate would be available for RST embedded in construction materials purchased before July 1, 2010, but used in residential property contracts on or after July 1, 2010.
- Subscriptions to newspapers, magazines and other periodical publications - The HST would not apply to subscriptions paid before July 1, 2010.
- Passenger Transportation Services - The HST would generally not apply to round-trip journeys that commence before July 1, 2010.
Read the full description of the proposed transitional rules in the Information Notice: General Transitional Rules For Ontario HST, dated October 14, 2009, available at ontario.ca/taxchange.
- The HST is just one part of a comprehensive tax package that would also provide, over three years, $10.6 billion in direct payments and permanent tax relief for the people of Ontario and $4.5 billion in tax relief for businesses.
- Consumers would not have to pay the Ontario portion of the HST on some items currently exempt from RST - children's clothing and footwear, diapers, kids' car seats and booster seats, books and feminine hygiene products.
- As under the federal Goods and Services Tax, the HST would not be charged on items such as basic groceries, prescription drugs and medical devices.
- The comprehensive tax package would result in the removal of $4.5 billion a year in embedded taxes when fully phased in, and about $2.5 billion a year in corporate income tax cuts.
- On June 18, 2009, Ontario proposed enhanced housing rebates and transitional rules for housing that would build on the comprehensive tax package. These measures would help Ontarians buying new homes, supporting a strong housing industry.
“These rules provide greater clarity for Ontarians as we move to implement a comprehensive tax package that will improve Ontario's competitive edge, helping to create a strong, growing economy and the jobs that come with it.”
“The comprehensive tax package is the single most important action the government could take to strengthen the Ontario economy for the long term. It would provide a lifeline to many businesses and would position the economy for rapid growth as Ontario emerges from the economic downturn.”