GST WORLDWIDE: INTERSTATE MOVEMENT OF GOODS & SERVICES IN CANADA

GST Update 10.01.2016

GST DAILY DOSE OF UPDATION:-

GST WORLDWIDE: INTERSTATE MOVEMENT OF GOODS & SERVICES IN CANADA:-

Different models of GST are found in Canada. Following are the key features of various models of GST followed in Canada:-

·        One federal VAT is imposed throughout Canada by Central Government except Alberta.
·        In Alberta, GST is only a sales tax.
·        In Quebec, VAT known as Quebec Sales Tax (QST) is applied to GST.
·        QST is administered by Quebec Government (State/Provincial Government) as per rules made by Central Government. Thus, it is dual GST - concurrent model.
·        In three small Atlantic provinces, there is joint GST known as Harmonized Sales Tax (HST) governed by Central Government.
·        In five provinces (States), separate Retail Sales Tax (RST) administered by state government and GST administered by Central Government, i.e. two rates are applicable.
Under above mentioned features, we would now discuss the treatment of inter-state movement of goods and services in Canada:-
A.    In Quebec:-
Inter-state movement of goods is dealt by a deferred payment system. Exports are zero rated for the purpose of QST but GST is levied on the same. Imports in Quebec are taxable but assessment for the purpose of tax is done only in case the goods are imported from another state/ province by a registered trader or consumer.

B.    In three States where HST is applicable:-
Interstate movement of goods and services is handled just like QST as discussed above. In other words, exports are zero rated and imports are not subject to provincial /State portion of HST. However, the higher HST rate is applied to sales to HST states besides GST rate.

C.     In five States where separate Retail Sales Tax (RST) is applicable:-
Here also, zero rating provisions are followed. In other words, a state does not tax the sale of goods dispatched to a destination outside its jurisdiction.

Thus, in Canada, three different types of practices are prevalent. Thus, a single type transaction occurring at different provinces/states shall be treated differently. Thus, administrative and compliance costs will be on higher side as compared to those countries where single type of tax system is adopted. These different practices may serve as tool for the purpose of tax evasion by the companies operating at multiple states. This system may be adopted only in exceptional circumstances where the states/provinces in a country are drastically different in terms of various social or economic environments.

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GST Update 10.01.2016

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