GST/HST registered suppliers – reporting the sales tax exemption for Ontario’s First Nations

With the introduction of the harmonized sales tax (HST) regime in Ontario on July 1, 2010, Ontario’s First Nations have continued to be exempt from paying the 8% provincial portion of the HST on eligible purchases off-reserve.
From July 1 to August 31, First Nations had to submit their receipts to the Ministry of Revenue to receive their refunds. However, beginning September 1, 2010, GST/HST registered suppliers are now able to credit status Indian purchasers with the 8% provincial part of the HST at the time of sale.

Draft regulations were released at the end of August detailing the credit relief to, and reporting obligations of, the supplier. A CRA GST/HST Info Sheet (GI-106 July 2010) provides additional information on how a GST/HST registered supplier is required to report the HST on qualifying supplies for reporting periods ending on or after September 1, 2010, and how the amount credited at the point of sale should be shown on invoices.

In contrast to other point-of-sale rebates, a supplier will be required to include on Line 105 of its GST/HST return the full 13% HST collectible in respect of the supply. The supplier will then report the total amount credited at the point of sale on Line 111 (Rebates). In addition, the GST/HST registrant will be required to complete and submit Form GST189, General Application for Rebate of GST/HST with their return, or filed separately if the return is electronically filed.

Unlike other instances where the 8% provincial part of the HST is credited (such as the point-of-sale rebates for certain designated items), the amount credited for qualifying off-reserve purchases should not be claimed as a deduction in the calculation of the registrant’s net tax. Suppliers who do not report the credit correctly will be subject to a penalty for misreporting the net tax owing on the GST/HST return.

If your business makes supplies to Ontario First Nations’ purchasers, you should ensure that you are correctly reporting the 8% credit on your GST/HST return and that the 8% rebate is properly claimed by filing Form GST189 with the CRA. It’s recommended that you consult with your professional adviser if you need assistance.