10 January 2008 GST/HST Ruling 100298 - XXXXX Green Tea XXXXX

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

This is in response to your XXXXX concerning the various factors and formulas applicable in determining the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) payable, the GST/HST new housing rebate amount and the amount of the Nova Scotia housing rebate. Your message was forwarded to us by Finance Canada for reply.

As you are aware, effective January 1, 2008, the rate of the GST will be reduced from 6% to 5% and the rate of the HST from 14% to 13%. The new rates will apply to supplies for which the GST/HST is paid on or after January 1, 2008, without having become payable before that date. Specific transitional rules will apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to GST/HST Notice 226, Proposed GST/HST Rate Reduction in 2008 on the CRA Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/README.html.

Based on these new rates, you would like to know the factors and formulas to determine the GST/HST payable, the GST/HST new housing rebate amount and the amount of the Nova Scotia housing rebate where a builder uses a stated price that includes these amounts.

To calculate the purchase price before the HST is applied, the factors and formulas when the sale is subject to the HST at 13% and the purchaser is entitled to both the GST/HST new housing rebate and the Nova Scotia housing rebate are as follows:

1. For new housing with a HST included price net of both housing rebates of $109,700 or less:

HST rate of 13%, GST/HST new housing rebate of 36% of federal component of HST, and Nova Scotia housing rebate of 18.75% of provincial component of HST to a maximum of $1,500

Purchase price (consideration) = HST included price net of rebates / 1.097

GST/HST new housing rebate = Consideration x 0.05 x 0.36

Nova Scotia housing rebate = Consideration x .08 x 0.1875

2. Where the HST included price net of both housing rebates is greater than $109,700 and less than or equal to $387,700:

HST rate of 13%, GST/HST new housing rebate of 36% of federal component of HST, and maximum Nova Scotia housing rebate of $1,500

Purchase price (consideration) = (HST included price net of rebates + $1,500) / 1.112

GST/HST new housing rebate = Consideration x 0.05 x 0.36

Nova Scotia housing rebate = $1,500

3. Where the HST included price net of both housing rebates is greater than $387,700 and less than or equal to $507,000:

HST rate of 13%, declining GST/HST new housing rebate, and maximum Nova Scotia housing rebate of $1,500

Purchase price (consideration) = (HST included price net of rebates +  $29,850) / 1.193

GST/HST new housing rebate = $6,300 x  ($450,000 - Consideration) / $100,000

Nova Scotia housing rebate = $1,500

4. Where the HST included price is greater than $507,000:

HST rate of 13%, purchaser not eligible for a GST/HST new housing rebate, and maximum Nova Scotia housing rebate of $1,500

Purchase price (consideration) = (HST included price net of rebate + $1,500) / 1.13

GST/HST new housing rebate = $0

Nova Scotia housing rebate = $1,500

To calculate the purchase price before the HST is applied, the factors and formulas when the sale is subject to the HST at 13% and the purchaser is entitled to a GST/HST new housing rebate but not entitled to the Nova Scotia housing rebate are as follows:

1. For new housing with a HST included price net of the GST/HST new housing rebate of $389,200 or less:

HST rate of 13% and GST/HST new housing rebate of 36% of federal component of HST

Purchase price (consideration) = HST included price net of rebate/1.112

GST/HST new housing rebate = Consideration x 0.05 x 0.36

2. Where the HST included price net of the GST/HST new housing rebate is greater than $389,200 and less than or equal to $508,500:

HST rate of 13% and declining GST/HST new housing rebate

Purchase price (consideration) = (HST included price net of rebate + $28,350/1.193

GST/HST new housing rebate = $6,300 x (450,000 – Consideration)/$100,000

3. Where the HST included price is greater than $508,500

HST rate of 13%, purchaser not eligible for a GST/HST new housing rebate

Purchase price (consideration) = HST included price / 1.13

The calculation for no.3 also applies where the HST included price is $508,500 or less and the purchaser is not entitled to claim the GST/HST new housing rebate (e.g., the primary place of residence test is not met) nor the Nova Scotia housing rebate.

The foregoing comments represent our general views with respect to the proposed amendments to the Excise Tax Act and are based on the Notice of Ways and Means Motion tabled by the Minister of Finance on October 30, 2007. Any change to the wording of these proposed amendments or any future proposed amendments to the ETA, if enacted, could have an effect on the interpretation provided herein. 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.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7945. 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,

Doretta Guoti-Thomas
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2007/12/11 — RITS 99963 — Application of GST to Light Housekeeping Plan