What is HST?
HST refers to Harmonized Sales Tax.
In certain provinces of Canada
like Newfoundland and Labrador
, New Brunswick
, and Nova Scotia
the Harmonized Sales Tax (HST) merge the Goods and Services Tax
with Provincial Sales Tax
to form a singular sales tax.
The earliest attempt to create a Harmonized Sales Tax took place in Saskatchewan
almost immediately after the Goods and Services tax was introduced in the year 1991. This was mainly done to make collection of tax more easy and convenient for merchants. However, the attempt at harmonization did not prove to be that popular.
Thus the HST was seen as some kind of tax grab. The government made a promise for reversing the harmonization. In 1996, Nova Scotia, Newfoundland and Labrador, and New Brunswick agreed to create a new form of Harmonized Sales tax. To make this form of tax
little popular with people the provinces lowered their rate of sales tax to 8%. This resulted in 15% cumulative tax when 7% of federal tax was included. This new form of tax was effective from April 1, 1997.
Canada revenue Agency
collects the HST and thereafter distributes the required amounts to the different provinces. In the year 2009, HST is effective in the three provinces where it was originally introduced. All other provinces still retain separate PST
and GST with the exception of Alberta
where there is no system of charging PST. There are other intricate complications associated with having different legislation
at the provincial and federal levels.
In case of certain goods GST is applied, but not PST or the condition is reversed in other category of goods. Quebec
and Prince Edward Island
apply the PSTs on the GST. Thus although there are certain obvious benefits associated with simplifying the entire sales tax collection, there also exists a great deal of confusion which a system of single comprehensive tax (HST) cannot fully handle.