People often confuse Harmonized Sales Tax (HST) with Goods and Services Tax (GST) in Canada. But the difference between the two is that GST comes under the HST. Although both are the type of consumption taxes, HST is a combination of GST and Provincial Sales Tax (PST).
Where PST relates to the provincial rules in Canada, GST is linked with the Federal regulations. Our main focus here is HST. So, let’s explore it in more detail.
HST is a consumption tax on the purchase of a service or good. Being a consumption tax, HST can be in various forms including, excise, tariffs, sales taxes, and other goods and services taxes. HST can also be considered as an entire taxation entity based on the consumption of the consumer. People who add to the economy are also taxed with HST for their income. The consumer and the business both have to pay HST at the point of sale. This tax reaches Canada Revenue Agency (CRA) after the HST rate has been added to the vendor’s cost of goods and services. Once the HST is remitted, it’s CRA’s job to allocate the provincial portion of the HST to the respective provincial authorities.
So, now the question is, “does the same HST rate apply to all the provinces of Canada?”
HST Rate Variations
Here is the simple answer to the above question. HST rate varies with the place of supply. A place of supply is the place where you not only operate your business but also provide the goods or services to the consumers. For example, suppose someone asks how to file HST returns to Ontario. In that case, the answer is, you pay 13% HST when providing your services or goods in Ontario. And if you are worried about the procedure, you should take professional assistance in this regard.
Filing your HST returns in Toronto, Ontario is different as compared to other provinces of Canada. The HST rates for New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island are 15%. In the rest of the provinces, there is a 5% GST and then PST rates are also there but no HST. Alberta, British Columbia, Manitoba, Nunavut, Quebec, Saskatchewan, Yukon, and Northwest territories are excluded from the HST list since they have their own provincial tax regulations. You can consult a professional tax consultant at any point in your business for the proper guidance on HST submission.
It is important to know when you have to charge, collect and remit your HST to the CRA. As a responsible citizen and a successful businessman, you cannot avoid these responsibilities. Sometimes, we get so involved in business activities that the essential bookkeeping is not done in time. This then leads to the delayed submission and filing of the tax returns, and then you have to deal with the penalties. This can also damage the reputation of your business. Therefore it is recommended to hire a bookkeeper, an accountant, or maybe an accounting firm to keep your tax returns on track.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.