Proposed GST/HST Rate Reduction in 2008
November 13, 2007
Note: This notice supersedes the previous versions dated November 2007 and November 9, 2007.
On October 30, 2007, the Government of Canada announced in its Economic Statement that it proposes to reduce the GST rate by one percentage point from 6% to 5%, effective January 1, 2008. To facilitate the transition to the lower rate, the Economic Statement also proposes transitional rules for determining the GST rates applicable to transactions that straddle the January 1, 2008 implementation date.
This notice provides a detailed set of questions and answers that reflect the proposed amendments to the Excise Tax Act. Any commentary in this notice should not be taken as a statement by the Canada Revenue Agency (CRA) that these amendments will be enacted in their current form.
For purposes of simplicity and consistency, the CRA will be following the same approach used in implementing the previous rate reduction.
Effective January 1, 2008, the rate of the GST and the federal component of the HST are proposed to be reduced from 6% to 5%. The provincial component of the HST will remain at 8%. This means that the rate of HST is to be reduced from 14% to 13%. Please note that the HST applies only to purchases made in or imported into New Brunswick, Nova Scotia, and Newfoundland and Labrador (the participating provinces)[Footnote 1] and the GST applies to supplies made in the rest of Canada.
For most purchases, the rate of tax will be determined by the date the GST/HST becomes payable or is paid. If GST/HST became payable or was paid in 2007, the old GST rate of 6%, or HST rate of 14%, applies. Otherwise, the reduced GST rate of 5%, or HST rate of 13%, applies if the tax became payable on or after January 1, 2008, or was paid on or after January 1, 2008 without having become payable before that day.
The following detailed set of questions and answers is provided to assist businesses and consumers in understanding how the reduction in these rates will apply. For more information on the GST/HST rate reduction, they can call 1-866-959-7797. This toll-free hotline service is available from 8:15 a.m. to 8:00 p.m. (local time), Monday to Friday.
Note: Legislative references in this notice refer to the Excise Tax Act (the Act) unless otherwise specified.
Table of contents
Information for businesses
Sales of property (excluding real property)
Coupons, price adjustments and returned goods
Tax accounting and invoicing
Information for consumers
Purchases of property (excluding real property)
GST/HST transitional rebate
GST/HST new housing rebates
Services and real property
First Nations taxes
Appendix – Transitional rules