Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 125136
November 28, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
[Correct Method of] HST calculation
Thank you for your letter of June 1, 2010, concerning the calculation of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST). We regret the delay in responding to your letter.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Interpretation Requested
What is the correct method of calculating the HST in Ontario? For example, on a food sale of $31.95, is the HST calculated as $31.95 x 13% or can it be calculated as the sum of $31.95 x 5% (the federal part of the HST) and $31.95 x 8% (the provincial part of the HST) with each of the subtotals being rounded?
Interpretation Given
Pursuant to subsection 165(1), every recipient of a taxable supply made in Canada shall pay tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply. Pursuant to subsection 165(2), every recipient of a taxable supply made in a participating province shall pay in addition to the tax imposed by subsection 165(1), tax in respect of the supply calculated at the rate of tax for that province (i.e., the HST), on the value of the consideration for the supply.
Subsections 165(1) and (2) read as follows:
165 (1) Imposition of goods and services tax - Subject to this Part, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply.
(2) Tax in participating province - Subject to this Part, every recipient of a taxable supply made in a participating province shall pay to Her Majesty in right of Canada, in addition to the tax imposed by subsection (1), tax in respect of the supply calculated at the tax rate for that province on the value of the consideration for the supply.
Subsection 165.2(1) deals with the situation where two or more taxable supplies are included on the same invoice and the rate or rates of tax imposed under section 165 is the same for each of those supplies. Where this is the case, the supplier may calculate the tax payable on the total consideration for these supplies instead of calculating the tax separately on the consideration for each supply. Either method of calculating the tax is acceptable.
Regardless of the method used by the supplier to calculate the tax and whether or not there is more than one supply on an invoice, the tax payable is subject to the rounding rules in subsection 165.2(2). Pursuant to this subsection,
• if the tax amount calculated includes a fraction of a cent and the fraction is less than half of a cent, the fraction may be ignored; and
• if the tax amount calculated includes a fraction of a cent and the fraction is equal to or more than half of a cent, the fraction must be increased to a full cent.
The phrase "tax that is at any time payable" in subsection 165.2(2) is sufficiently broad to allow both rounding of total tax and rounding of each of the federal and provincial parts. As long as a registrant is consistent in its choice of method, and reports the tax charged, either method would be acceptable.
As such, either of the following calculations is acceptable.
$31.95 x 13% = $4.1535 = $4.15
$31.95 x 5% = $1.5975 = $1.60
$31.95 x 8% = 2.5560 = 2.56
$4.16
Subsections 165.2(1) and (2) read as follows:
165.2 (1) Calculation of tax on several supplies - Where two or more taxable supplies are included in an invoice, receipt or agreement and tax under section 165 is imposed in respect of each of those supplies at the same rate or rates, the tax payable in respect of those supplies, calculated on the consideration for those supplies that is included in the invoice, receipt or agreement, may be calculated on the total of that consideration.
(2) Rounding of tax - Where tax that is at any time payable under this Division in respect of one or more supplies included in an invoice, receipt or agreement is an amount that includes a fraction of a cent, the fraction
(a) if less than half of a cent, may be disregarded for the purposes of this Part; and
(b) if equal to or greater than half of a cent, shall be deemed, for the purposes of this Part, to be an amount equal to one cent.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
You may view GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service on our website at www.cra-arc.gc.ca/E/pub/gm/1-4/README.html.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-2488. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Doug Campbell
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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