Goods and Services Tax (GST) and Harmonized Sales Tax (HST)

The university is subject to federal Goods and Services Tax (GST) and Harmonized Sales Tax (HST) legislation as applicable to the procurement of goods and services. The purpose of this section is to assist units to understand their responsibilities related to GST and HST.

Questions regarding the applicability of GST and HST to procurement should be referred to Supply Management Services (customerservice@sms.ualberta.ca). For an overview of GST and HST and glossary of related terminology, refer to Guide Chapter 6: Overview of Goods and Services Tax (GST) and Harmonized Sales Tax (HST).

For the purposes of these guidelines, procurement includes all payments processed through the Accounts Payable and Travel & Expense modules (i.e. all non-payroll payments).

In this section:

Goods and Services Tax (GST)
Harmonized Sales Tax (HST)
Appendix – GST Book Rebate

 

Goods and Services Tax (GST)

GST is required to be assessed by the university’s suppliers (vendors) upon the sale or rental of goods and the provision of services purchased in Canada. GST is paid when the purchase is made (in the case of cash purchases) or when a supplier invoice is processed for payment. GST applies to all supplies of property, including tangible, intangible, personal, intellectual and real property.

Procurement transactions are taxable at 5% or 0% (“zero-rated”) or may be exempt from GST.  It is the responsibility of the vendor to determine the GST amount.

The university will pay the 5% GST on invoices only when the supplier's GST registration number is on the invoice and the amount of the GST is shown on a separate line or the words "GST Included" is indicated on the invoice. Small suppliers (those with gross taxable sales of less than $30,000 in the previous twelve months) are not required to register for GST, and will not assess GST on their invoices.

A GST decision tree is provided to assist with the determination as to the appropriate GST assessment. Refer to the following link.

Link:

GST Tax Coding of Expenses (Purchases) (pdf)

GST Rebates and Input Tax Credits (ITC)

As a public service body for GST purposes, the university is able to claim a rebate of 67% of the GST paid on purchases incurred to provide non-taxable supplies. Most of the university’s supplies are non-taxable as the university’s mandate is teaching, research and community involvement. An exception is books, publications and subscriptions purchased for use by the university (i.e. not for resale), to which a “book rebate” of 100% is applicable. To receive the 100% rebate, the unit must code the purchase to account 502203 – Books & Publications. Refer to the Appendix at the end of this section for further information on the applicability of, and process for claiming, the book rebate.

Some units are eligible to claim input tax credits (ITCs), which are a 100% recovery of the GST paid on purchases related to commercial activity involving the sale of taxable supplies to external customers including university staff, students and external organizations.  Some units are considered by the university to be 100% commercial (e.g., Bookstore, Parking Services, University Press, Art Store) and claim ITC on all purchases related to their taxable supplies. Other units may have ad hoc commercial activities (e.g. conferences, workshops) and may be eligible to claim ITC on purchases related to these activities. When ITC is claimed, the unit is responsible for demonstrating that the ITC relates to purchases made to provide taxable sales.

Although the university must file a GST return to recover the rebate or ITC, units receive the benefit immediately, as the rebate or ITC is applied at the time of processing in the Accounts Payable or Travel & Expense module. Only the unrecoverable portion of GST is charged to the unit’s account.

The GST rebate or ITC can be claimed only when GST is paid on goods or services to be used by the university itself. External entities and individuals including staff, students and University of Alberta student groups are not, under any circumstances, allowed to benefit from the university's GST status. Therefore, the university’s procurement processes must not be used for non-University of Alberta purchases.

GST on Purchases and Payments Other Than Corporate Purchasing Card Transactions

To ensure the GST amount and rebate or ITC are processed correctly, the appropriate tax code must be applied at the time of processing the purchase or payment. Unless otherwise indicated, the tax code defaults to “GST”, which results in the tax being calculated as 5% of the total amount and the 67% GST rebate being claimed. It is the responsibility of the unit to ensure that the proper GST code is recorded on the requisition or invoice for each item being purchased. If the goods or services being purchased will be resold as taxable sales, the unit must indicate on the requisition or invoice that the tax code ITC is applicable. Certain departments (deptIDs) and projects where the activity is all considered commercial can be set up to default to ITC rather than 67% rebate, and do not need to indicate the tax code ITC.  For a department or project that is eligible for ITCs on all transactions, please contact Financial Services to arrange for the department or project to be set to default to ITCs rather than the standard 67% rebate.

The following summarizes the GST treatment applicable to purchasing and related transactions:

GST Use Type

Tax Code

Net GST Rate

Applicable to

MAPP

GST

1.65%

Majority of goods and services

MAPP

GST

0%

Some units and projects, on commercial purchases eligible for ITC

MAPP

N

0%

Purchases on which GST is not paid (e.g. small vendors)

MAPP

GST_GRAT

2.29%

Travel-related expenses that include gratuities (e.g. meals, ground transportation)

BOOK

GST

0%

Purchase of books other than for resale (see Appendix)

ITC

GST

0%

Selling units, on purchases for resale


Note: GST is not recovered on petty cash disbursements, due to immateriality.

GST on Corporate Purchasing Card Transactions

Payments charged to the corporate purchasing card (PCard) may or may not include GST. As the credit card provider does not have access to the actual invoices from vendors, the GST shown on the PCard statement is calculated according to certain assumptions. If the calculated amount is incorrect, the unit is responsible for making the correction during the monthly reconciliation process. Refer to the Corporate Purchasing Card System Procedure.

Due to immateriality, purchases of imported services and intangible property are not self-assessed GST for corporate purchasing card transactions.


The following summarizes the GST coding and action required by units:

Location of Vendor

GST on PCard Statement

Unit Action Required

Canada

  • 5% of total amount paid to vendor
  • default tax code is “GST” (67% rebate is applied and unit is charged the unrecoverable portion)
    • correct the GST amount if different from vendor invoice
    • change the tax code to ITC if the unit or transaction is eligible for the input tax credit
    • change the tax code to BOOK if the purchase is a qualified book, publication or subscription (i.e. not for resale). Refer to Appendix for further information.

Outside of Canada

  • no GST
  • default tax code is “N”
    • if the GST amount is different from vendor invoice, correct the GST amount and change the tax code to GST (Note: some non-Canadian vendors are registered for GST purposes)

GST on Imports

Imported Goods

Goods acquired from foreign vendors and imported into Canada are generally subject to GST. This includes items purchased and items acquired at no charge (e.g. warranty repairs, free samples, free books), as well as the related shipping and handling (e.g. brokerage) fees. Certain imported goods are not subject to GST, including the following:

  • goods valued at less than $20 Canadian
  • personal and household effects of persons moving to Canada
  • returnable containers used to transport goods internationally
  • commercial samples imported solely for temporary (up to 60 days) exhibition or demonstration purposes
  • medals and trophies
  • free tourist literature (e.g. travel brochures)
  • imports by charities of donated goods
  • goods replaced by warranty
  • parts supplied at no charge (Note: the related shipping and handling fees are subject to GST)
  • zero-rated goods

The applicable GST is calculated on the value of the imported goods, including duties, in Canadian funds and is assessed upon entry to Canada by Canada Border Services Agency (CBSA). The university’s customs broker pays the GST and bills the university. The net GST (after rebate or ITC) is charged to the unit by Payment Services.  The non-rebated GST portion will be processed through the same expense account as the rest of the transaction and may appear as a separate transaction in reports.

Imported Services and Intangible Property

It is not possible for the Canadian Border Services Agency to collect tax on imported services and intangible property as these do not cross the border. The university is required to self-assess and remit GST based on the value of these supplies under the imported taxable supply rules, except for the following:

  • exempt and zero-rated services and intangible property
  • services and intangible property being acquired for resale (i.e. purchases that qualify for ITC). The GST is ignored in this case. 

Services provided by a foreign vendor are not subject to GST if used exclusively in activities that occur completely outside of Canada, such as transportation services and services consumed personally by an individual during travel outside of Canada. In these cases, the service is not imported into Canada. Examples of services and intangible property typically imported to the university and subject to self-assessment include data base services, license/maintenance agreements, electronically downloaded software, engineering services, management services and intellectual property.

Self-assessment of GST should occur at the time of processing a purchase order. The following describes the GST self-assessment process for purchases other than those made through the corporate purchasing card:

  • The unit is responsible for including a detailed description on the purchase requisition as to what is being purchased from the foreign vendor. 
  • A supply consultant in Supply Management Services (SMS) will determine whether the purchase is subject to GST self-assessment and, if so, will ensure the requisition is processed to a GST self-assessed vendor number.
  • At the beginning of each month, Financial Services – Accounting and Reporting generates a report on purchases processed to GST self-assessed vendors for the previous month and, if applicable, contacts units to determine whether any purchases were related to commercial activities (i.e. purchases for resale) or to services or intangible property consumed outside of Canada (e.g. work performed on/to property situated outside of Canada; patent legal fees where the patent cannot be used in Canada), as GST is not required to be paid in these cases. 
  • GST is processed in the same manner as on purchases from Canadian vendors, with the unrecoverable portion charged to the same account as the purchase.  The unit is notified of the GST amount to be processed to the account. 

Purchases made through the corporate purchasing card are not self-assessed due to immateriality.

GST on Purchase Refunds, Rebates and Cash Discounts

Refunds from Vendors

When a refund is received from a vendor for goods or services that have been returned or not received, the GST amount previously recorded must be adjusted to reduce the GST rebate or ITC claimed. The result should be to reverse the entry processed when the invoice was paid, or, in the case of a partial refund, to reverse the entry by apportioning the appropriate amounts to the unit expense account and the GST receivable account.

Vendor Refund Received by Cheque or Currency

If the refund is received in form of cheque or currency, the unit will deposit the refund via Cashier as shown in the following examples.

Example 1: The full amount of a purchase of $100 plus $5 GST has been refunded by the vendor. When the payment to the vendor was processed, the unrecoverable GST amount of $1.65 was debited to the same expense account (in this case, 502101), and the recoverable GST amount of $3.35 was debited to account 100802 (GST Receivable).  The unit will process the refund via Cashier as follows:

Speedcode

Account

Distribution Amt.

Tax Code

Tax Amount

Gross Amount

(Distribution+Tax Amt)

12345

502101

101.65

N

0.00

101.65

12345

100802

0.00

N

3.35

3.35

 

Example 2: A partial refund of $50 on the purchase shown in Example 1 has been received. In this case, the unit must calculate the amount of GST to be credited to the GST receivable account by multiplying the refund received by 5/105. On the refund the GST recovered was $1.60. The unit will process the refund via Cashier as follows:

Speedcode

Account

Distribution Amt.

Tax Code

Tax Amount

Gross Amount

(Distribution+Tax Amt)

12345

502101

48.40

N

0.00

48.40

12345

100802

0.00

N

1.60

1.60

 

Example 3: The refund in Example 1 was for a book on which the book rebate of 100% was recovered by the unit. The applicable GST receivable account in this case is 100803. The unit will process the refund via Cashier as follows:

Speedcode

Account

Distribution Amt.

Tax Code

Tax Amount

Gross Amount

(Distribution+Tax Amt)

12345

502101

100.00

N

0.00

100.00

12345

100803

0.00

N

5.00

5.00

 

Example 4: The refund in Example 1 was for a product on which the unit received ITC. The applicable GST receivable account in this case is 100804. The unit will process the refund via Cashier as follows:

Speedcode

Account

Distribution Amt.

Tax Code

Tax Amount

Gross Amount

(Distribution+Tax Amt)

12345

502101

100.00

N

0.00

100.00

12345

100804

0.00

N

5.00

5.00

Vendor Refund Received by Credit Note

If the refund is made in the form of a credit note, the unit will send the credit note to Payment Services, who will process it in the accounts payable module using the same GST tax code as the original purchase.

Refund on Overpayment of GST on Imported Goods

When an overpayment of GST on imported goods occurs, the Distribution/Customs unit within Supply Management Services is responsible for processing an entry to recover the overpayment from the Canada Revenue Agency (CRA) and to adjust the unit’s unrecoverable amount of GST.

Cash Discounts

When a cash discount is taken (e.g. discount for early payment), the discount is applied to the unit’s total cost after GST has been calculated. The amount of GST payable on the purchase before the discount is not reduced. Similarly, GST is not applicable to additional charges for interest or penalties for late payments.

Volume Rebates

For GST purposes, volume rebates are considered to be a reduction of original purchase price, and are treated in the same manner as refunds from vendors.

GST on Travel & Expense (T&E) Reimbursements

The GST paid on travel and other expenses (T&E) claimed for reimbursement are eligible for the GST rebate or ITC (if the expense is coded to an ITC deptID or project). Expenses must be supported by invoices containing the supplier's GST registration number and clearly indicate the amount of GST paid, except in the case of per diem amounts such as meals and certain travel-related expenses for which a receipt is not required

When reimbursements are processed through the Travel & Expense module, the total amount of each expense (including GST) is entered and the GST amount is automatically populated. Generally, this calculation is based on the assumption that 5% GST is included in the cost. Exceptions include meals, hospitality and ground transportation, on which the total amount paid is assumed to include a gratuity. In these cases, the assumed GST for the purposes of the calculation is 4%, as the gratuity portion is not subject to GST. Where an expense was incurred in a foreign location and no GST was paid, the automatically populated GST amount should be overridden by the claimant and entered as $0.

If claiming reimbursement for books, the Expense Type “Books/Publications” may be used only if the purchase is eligible for the 100% Book Rebate. Refer to the Appendix for further information on the book rebate.

GST on Professional Expense Reimbursement (PER)

As expenses claimed from the Professional Expense Reimbursement (PER) program are university expenses, only the net GST after the rebate is applied is charged to the employee’s PER allowance. PER expenses are not eligible for ITC, as purchases are not available for resale.

PER reimbursements are processed through the Travel & Expense module. Refer to GST on Travel & Expense (T&E) Reimbursements for further information.

Link:

GST Tax Coding of Expenses (Purchases) (pdf)

GST on Cost Recoveries

Refer to Guide Chapter 7: Goods and Services Tax (GST) and Harmonized Sales Tax (HST) – External Sales and External Cost Recoveries.

Harmonized Sales Tax (HST)

As the university is not located within a HST-participating province, the majority of units need only be familiar with the Goods and Services Tax (GST) guidelines. This section, therefore, is intended to provide information to enable units to determine when a purchase is subject to HST rather than GST.

The following summarizes the applicability of HST regulations to the University of Alberta:

  • GST, not HST, is payable when vendors located in an HST-participating province (Ontario, New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island) sell goods and services to the university and/or deliver these to a university location (i.e. in Alberta).
  • HST is payable when goods and services sold to the university are delivered to location in one of the HST-participating provinces.
  • Freight or courier shipments from the university and destined for one of the participating provinces are subject to HST (i.e. HST is charged on the freight/courier invoice).
  • The university can claim rebates only on the 5% federal portion of the HST i.e. no rebate can be claimed on the provincial portion of the HST.
  • Expenses incurred for travel occurring in HST-participating provinces (e.g. airfare, accommodation, meals, vehicle rental) are subject to HST. These expenses are entitled to a rebate based on the GST portion of the HST only. The additional amount of HST is not eligible for a rebate.

Appendix – GST Book Rebate

The GST book rebate of 100% may be available on the following publications:

  • a printed book or an update of such a book
  • an audio recording all or substantially all of which is a spoken reading of a printed book, and
  • a bound or unbound printed version of scripture of any religion

The following conditions must be satisfied to qualify for the book rebate:

  1. The purchaser must be a specified person (the University of Alberta is a “specified person”)
  2. The rebate only applies to the GST (or the federal portion of the HST – e.g. 5% of the 13% charge) paid.
  3. The materials will not be resold or gifted. Books for resale (taxable or zero-rated sales) are eligible for the ITC on GST/HST paid at acquisition or importation. Books that are purchased as gifts are eligible only for the 67% University Rebate.
  4. The rebate must be claimed within the legislative limit of 4 years.

How to Claim the Book Rebate

When ordering a book that qualifies for the book rebate, the words "Entitled to 100% Book Rebate" should be noted on the purchase requisition. The SMS buyer will then use GST User Type "BOOK" on the purchase order. When the vendor invoice is processed, the unit will not see any GST component.

In the case of an invoice for payment that was not initiated with a purchase order (e.g. low dollar purchase), the unit must note "Entitled to 100% Book Rebate" or User Type "BOOK" on the invoice prior to forwarding to Payment Services.

Printed Books

The following includes several references to advertising. Refer to the Advertising section below for further information.

For the purposes of the book rebate, a printed book includes anything that is, or the main component of which is: 

  • a magazine, comic book or other periodical obtained by subscription and in which 5% or less of the total printed space is advertising
  • a book published as a loose-leaf series supplied on a subscription basis where the subscription charges include replacement pages and instruction sheets to keep the books up-to-date and to expand the text 
  • an art exhibition catalogue which contains reproductions of works in the exhibit, descriptive text accompanying the reproductions and, usually, biographical information on the artists contributing to the exhibit. These act as a guide to and commentary on an exhibit, and contain little or no advertising or prices. Any value given is not for sale purposes.
  • a coin, stamp or antique catalogue with a similar reference function
  • a book which is a reprint of a historical catalogue which cannot be used to purchase goods, published purely for historical purposes
  • a book that consists primarily of practice tests with explanatory answers (e.g. an exercise book, a book designed primarily to prepare students for a certain examination)
  • a yearbook (e.g. school yearbook)
  • a book consisting principally of maps other than street or road maps (e.g. contemporary atlas, historical atlas) 
  • a guide book designed to assist persons in discovering elements of interest at a geographic location and may include some maps. The maps are generally secondary to descriptive passages about the location.

 A printed book does not include anything that is, or the main component of which is:

  • a newspaper
  • a magazine or periodical acquired otherwise than by way of subscription
  • a magazine or periodical in which the printed space devoted to advertising is more than 5% of the total printed space
  • a brochure or pamphlet
  • a sales catalogue, a price list or advertising material
  • a rate book
  • an assemblage of blueprints, patterns or stencils
  • prescribed property 
  • brochures and pamphlets consisting of a few pages of printed matter fastened together
  • a sales catalogue, price list or advertising material. A sales catalogue is considered to be a publication that lists, enumerates, describes or depicts names, titles, persons, things, properties or services, with or without explanatory or descriptive remarks, designed primarily to promote the sale of the properties or services.
  • a price list and advertising material when published in book form
  • a book published by a manufacturer promoting the use of the manufacturer's products (e.g. cookbook with recipes using the manufacturer’s products). This is regarded as advertising material. 
  • a warranty booklet or owner's manual. Books of instruction for a particular product, whether written by the product's manufacturer or by someone else, are considered to be in the same class as an owner's manual. (e.g. instruction guides for users of a particular software, books on how to repair a particular make of automobile)
  • printed material to accompany software that has been downloaded from the Web
  • a book designed primarily for writing or drawing on (e.g. address book, diary, journal). This excludes subscriptions to crossword puzzle magazines, "find-a-word" magazines and similar publications issued on a periodic basis , which are considered periodicals and not books for writing on (therefore, eligible for the book rebate).  Note: If 5% or less of total space of such publications is devoted to advertising it qualifies for the 100% Book Rebate. 
  • a colouring book, scrapbook or album (e.g. scrapbook for clippings, sticker book, sketchbook, album for photographs, stamps, or coins).
  • a cut-out book or press-out book (these are usually children's activity books)
  • a program relating to an event or performance (e.g. sports event, concert, play, assembly)
  • an agenda, calendar, syllabus or timetable (e.g. university calendar) 
  • a directory (e.g. telephone, postal codes, fax numbers)
  • a directory that lists services available to the reader (e.g. municipal service directory)
  • a book that is primarily a listing of national or local goods and service providers
  • a manufacturing, industrial or trade directory
  • a road map, street map, chart, pattern or blueprints when bound in book form
  • a rate book (e.g. insurance rates)
  • an assemblage or collection of, or any item similar to, items included in any of the above

Advertising

Advertising includes:

  • all space devoted to advertising whether sold or donated 
  • all headings, instructions and promotional material relative to classified advertising, (e.g., if "Classified Ads Section" appears as a heading, it is regarded as advertising) 
  • all other space, excluding the masthead, devoted to the business of the publisher, such as subscription advertisements, coupons and other advertisements on behalf of publishers 
  • sponsored material, such as written articles and illustrations relating to the opening of a shopping centre, business or commercial enterprise, published at the request and expense of an advertiser 
  • articles written to promote the use of particular products are also considered advertising 

Audio Recordings of Printed Books

An audio recording is the reproduction of a printed book in audio form (i.e. a spoken reading).

The book rebate is applicable to:

  • a recording that represents a summarized or abridged version of a book, if the recording reflects, even in summary or abridged form, the contents of the book
  • an audio version of a book that includes minimal commentary, analysis, or interpretation in addition to the text of the book, or additions that are not incorporated into the narrative (e.g., brief opening or closing comments or music)
  • a recording of excerpts from a published book  Note: A recording based on an unpublished manuscript is not eligible for the book rebate.
  • a recording of performances of published plays  Note: A recording of performances of musical scores is not eligible.

Religious Scriptures

Purchase of bound or unbound printed versions of scriptures of any religion are eligible for the book rebate if they are purchased by specified persons (i.e. the university) for purposes other than resale or as a gift.

Religious scriptures that are eligible for the rebate included writings such as the Koran, the Bible, prayer books, missals and hymn books and Torah scrolls, whether bound or unbound. Illustrated versions of religious scriptures (e.g. comic book versions) are also eligible for the book rebate.



Last Updated: March 2016