HST Transitional Rules

Posted By: David M. Piccolo on December 11, 2009 at 9:03:06 in Corporate & Business Taxation , News

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HST Transitional Rules

On December 9, 2009, the Ontario Legislature passed its controversial bill implementing the HST in Ontario. Starting July 1, 2010, a 13% HST will be applied to sales of most goods and services. However, consumers looking to avoid paying the HST need to review the transitional rules for personal property and services. The following are a few highlights.

According to the transitional rules, if a consumer were to pay for personal property after May 1, 2010 for goods to be delivered after July 1, 2010, the consumer will be subject to the HST. Further, if a consumer prepays for a service after May 1, 2010 in which 10% or more of the service is performed on or after July 1, 2010, the consumer will be liable for HST on the portion of the service performed on or after July 1, 2010.

Another interesting note in the transitional rules relates to exchanges. Any exchanges, for purchases made prior to July 2010 which was subject to PST, made between July 1, 2010 and October 31, 2010 will be subject to the following rule: if the exchanged good is more expensive than the returned good, HST will apply on the difference; if the exchanged good is less expansive, HST will not apply. However, if the good was not subject to PST, and the exchange occurs after July 1, 2010, HST will be applied on the full amount of the replacement good.