British Columbia intends to harmonize its provincial sales tax (PST) with the Federal goods and services tax (GST) effective July 1, 2010.
The current PST rate in BC is 7%, which, when combined with the GST will result in a harmonized sales tax (HST) rate of 12%.
The implementation of HST removes a consumer tax (PST) which is costly for businesses and government to administer. Even a small business (such as a self-employed person) which is not required to register to collect GST has to register to collect PST if it sells or provides any amount of a product or service which is subject to PST.
Businesses which are registered to collect GST or HST can claim input tax credits to recover all of the GST or HST that they have paid. The change to HST will mean a significant savings and boost in productivity for businesses in BC, because:
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they will no longer have to pay PST |
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they will no longer have to prepare PST remittances |
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they will save on consulting costs - the PST rules are very complicated, and frequently require professional advice in their interpretation |
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employees will spend much less time trying to find the answers to PST questions |
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PST audits will be eliminated |
Although consumers will now have to pay 12% HST on some items on which they only paid 5% GST, several items which are currently PST exempt will not be subject to the provincial portion of the HST. These items are:
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gasoline and diesel fuel for motor vehicles |
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books |
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children's-sized clothing and footwear |
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children's car seats and car booster seats |
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diapers and feminine hygiene products |
In their September 2009 Budget Update, the provincial government announced that it also proposes to provide a provincially administered HST exemption for residential energy use. This was included in their HST backgrounder (pdf) document.
Other provisions of the proposed HST:
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New housing rebate for new homes purchased as a primary residence - a partial rebate (71.43%) of the provincial portion of the HST for new housing to ensure that new homes up to $525,000 (increased from $400,000) will bear no more tax than under the current PST system, while homes above $525,000 will receive a flat rebate of $26,250 |
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Enhanced new rental housing rebate, same as above rules for new primary residence homes - available to landlords who
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a refundable BC HST credit will be paid quarterly with the GST and carbon tax credit to offset the impact of the tax on those with low incomes. |
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a temporary delay in the provision of input tax credits for certain purchases by businesses with taxable sales in excess of $10 million. |
The proposed changes are subject to legislative approval.
Proposed General Transitional Rules for BC HST
Transitional rules are required to determine which tax - the existing PST (Social Services Tax) or the BC component of the HST - would apply to transactions that straddle the July 1, 2010 implementation date.
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For further information on the BC HST and the proposed transitional rules, see the following on the BC Ministry of Finance website
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Rebate threshold and transitional rules for new housing (pdf) - Nov 19, 2009 |
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Point-of-Sale Rebates for BC HST (pdf) - Nov 16, 2009 |
