This Information Bulletin is intended to assist departments in identifying and preparing for changes necessary in their financial systems and QST rate references in departmental documentation resulting from the changes that are being introduced to the QST as a result of sales tax harmonization with the Goods and Services Tax (GST).
Currently, it is Government of Canada policy that departments charge and collect the GST and Provincial Sales Tax (PST), or the Harmonized Sales Tax (HST) as applicable, on their taxable products and services and pay GST or HST on their purchases. Pursuant to the Reciprocal Taxation Agreements between Canada and provinces or territories, departments are exempt from paying PST on their purchases where applicable.
In the Province of Quebec, departments charge and collect GST and QST where applicable and are exempt from paying QST.
Harmonization of GST and QST
On March 28, 2012, Canada and Quebec entered into a Comprehensive Integrated Taxation Coordination Agreement (CITCA) which provides the framework for the harmonization of the GST and the QST.
As part of the CITCA, Canada agreed to replace the current exemption mechanism from paying QST applicable to federal government departments with a tax payment and rebate mechanism as of April 1, 2013. In other words, the federal government departments will now be required to pay the QST on their applicable purchases as of April 1, 2013. In addition, the Government of Quebec agreed to pay GST/HST on their taxable supplies as of April 1, 2013.
On May 31, 2012, Finances Québec issued Information Bulletin 2012-4 outlining the general rules and transition measures as a result of the Canada-Quebec CITCA. The following sections highlight the major changes outlined in the Quebec Tax Information Bulletin.
1. Removal of the GST from Quebec's Tax Base and Corresponding Rise in the QST Rate
The province of Quebec will remove the GST from the tax base on which the QST applies, as of January 1, 2013. At the same time the 9.5% rate of the QST will be raised to 9.975%. Therefore, departments will be required to modify their financial system to implement this rate change.
2. Government Purchases and Rebate System
Currently, federal departments are exempt from paying the QST. As of April 1, 2013, departments will be required to pay the QST on their purchases at the point of sales. Tax exemption certificates will no longer be applicable in the province of Quebec starting that date.
Canada will be entitled to subsequently recover QST paid by submitting a rebate claim to Revenue Québec.
The administrative details on processing tax payments and rebates have not yet been completed. The Office of Comptroller General will issue further guidance once this information becomes available.
3. Federal Government Sales to Quebec Government Departments
Federal government departments will be required to charge Quebec government departments GST/HST on their taxable purchases as of April 1, 2013. The Quebec government will be able to subsequently claim a refund of the GST/HST paid from the Canada Revenue Agency (CRA).
Changes to the Government Authorities, Accounting and Reporting Structures
At this time, it is recommended that an assessment of the changes required to implement the new provisions of the QST be conducted by departments with a focus on elements such as financial systems and QST rate references in departmental documentation (e.g. invoices, contracts, internal web sites, point of sale systems and departmental policies, processes and procedures). This assessment will facilitate an effective implementation of the changes required to comply with the new QST requirements as of April 1, 2013.
The following are the consequential changes to the Government of Canada authorities, accounting and reporting structures resulting from the changes to the QST:
1. Source of Authority
Pursuant to the Federal-Provincial Fiscal Arrangements Act, a statutory, non-budgetary vote has been created. As a result, the changes to the QST will not have an impact on departmental appropriations.
2. Accounting and Reporting
New codes have been created and will be added to the 2013-14 Government-Wide Chart of Accounts (GWCOA) in order to facilitate the future recording of the QST that will be paid once the changes to Quebec's tax system have been fully implemented. Departments will be required to record the QST paid or payable at the point of sale and report the QST paid or payable in their departmental financial system which will then be recorded in the monthly trial balance submitted to the Receiver General of Canada.
The following codes have been created in the GWCOA:
- Financial Reporting Account (FRA)
13396 – Quebec Sales Tax (QST) Refundable Advance Account
- Economic Object (ECON)
8172 – Payment of QST on Purchases
- Authority Code
G113 – Quebec Sales Tax (QST) Refundable Advance Account
For example, when a department purchases goods or services subject to QST, the entry to record the expense, QST and GST would be as follows:
|Financial Reporting Account (FRA)||Amount $||FRA||Authority Code||Object Code|
|Note: A description of codes can be found in the Government-Wide Chart of Accounts.|
|Debit: Operating expenses||insert dollar amount||51321||B11A/B12A||XXXX|
|Debit: GST Refundable Advance Account||insert dollar amount||13392||G111||8171|
|Debit: Quebec Sales Tax (QST) Refundable Advance Account||insert dollar amount||13396||G113||8172|
|Credit: Accounts payable ongoing||insert dollar amount||21111||R300||6299|
The regular process for discharging the accounts payable will apply. Additional accounting guidance regarding the settlement of the QST Refundable Advance Account will be provided at a later date once additional information becomes available.
Should you require further information about this Information Bulletin please contact:
Financial Management Sector
Office of the Comptroller General
Treasury Board Secretariat
Email the Financial Management Sector or call at 613-957-7233
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