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How Will the New HST Affect My Business? - FAQ


I’ve heard that the HST is not yet law. Will the HST actually come into effect?
Ontario received $4 billion and British Columbia received $1.6 billion in transfer payments from the federal government if they agreed to harmonize their PST’s with the GST. It is highly likely that the proposed HST will become effective as planned.

The proposed HST will only affect my invoicing system, right?
The GST/HST affects almost everything a business or organization does, with very few exceptions (e.g. payroll). The HST will affect:

  • Pricing of products or services
  • Cash flow
  • Invoicing systems
  • Contracts
  • Disclosure on sales invoices
  • Purchases, including purchases of input tax credit restricted items
  • Advertising
  • Taxable Benefits for employees
  • Transactions from May 1, 2010 forward may be affected, not just transactions on or after July 1, 2010
  • Returns of sales straddling July 1, 2010

All I need to do is change my invoicing system from 5% to 12% or 13%, right?

The rate of tax may differ. You’ll need to review the “place of supply” rules to determine which rate of tax will apply, particularly if you have customers, employees, or locations in more than one province. If you provide a combination of goods, services, and intangibles, it will not be straightforward to determine the rate of tax to apply.

Are there any implications if I charge the wrong GST/HST rate?
If you charge a rate that is too low, the Canada Revenue Agency may assess the difference plus interest, which is compounded daily. If you charge a rate that is too high, you will create a cash flow issue for your customers. Also, customers may have to claim a rebate for tax paid in error rather than claiming an input tax credit.

What’s happening with the Ontario and BC PST for past transactions?
The Ontario and BC governments can still audit compliance with PST, and may increase audit activity to try to maximize revenue.

If you have any questions about your business and HST, please contact me or your local MNP advisor.