General Comments
On July 1, 2010, the ORST disappears and GST becomes HST (at 13%).
Generally speaking, the HST uses the same rules and same tax base as the GST.  In fact, with certain critical exceptions, it is really the same old GST but with a rate increase and a name change.

 

Getting Ready
By now you should have been assessing the impact of the new HST on your business.  It may have an impact on budgets and pricing. Without proper planning you may be over charging or undercharging your customer.  If the customer is undercharged you will be liable for the unpaid tax.

 

Consider the following steps in your implementation plan. 

 

Review how the changes will affect your specific operations.

• The HST rules differ for organizations selling product, or providing services.
• The new rules are particularly complex for the construction industry.

Make note of the critical dates, and transitional rules

• Especially June 18, 2009, May 1, 2010 and July 1, 2010 and their impact.
• The transitional rules determine what rate of GST/HST will apply, and may differ for various transactions.

Review your pricing policies

• Especially if you are engaged in “supply and install” contracts.  Your cost of product may be reduced and astute customers may expect price relief.

Review budgets

• Determine your organization’s current ORST exposure as these costs will disappear.
• Evaluate capital budgets as timing will impact on the cost of new acquisitions.
• Evaluate cash flows as accounts receivable and GST/HST receivables may increase as previously ORST exempt purchases will now incur the HST.

Ensure that computer systems are ready

• It is critical that point of sale terminals are ready to properly charge the new HST.
• Ensure that accounting software is ready to track the detail required for HST returns particularly if yours is a large enterprise (over $10 million in revenue) subject to the temporary ITC restrictions. 

Review Place of Supply Rules

• If shipping product out of Ontario, or providing services to persons outside of Ontario, complex “place of supply” rules may apply.  These rules determine the appropriate rate of GST/HST to be charged.

 

Please consult with your Powell Jones advisor if you require assistance with these or any other taxation or financial matters.