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Goods and Services Tax (GST)

 Reference Guide - Tax Codes Used in FIS

 Taxation (Summary of Taxation at U of T)

The Goods and Services Tax (GST) applies to the majority of goods and non-employment
services purchased by the University.

However, the University is eligible for a partial rebate of GST paid on items purchased. For
Universities the rebate is 67% of GST paid.

Therefore, the University claims a rebate of 3.35% (67% of 5% GST paid); the net GST cost
to the University is 1.65% (5% minus 3.35%).

The buying department's cost, therefore, is the supplier's invoice amount, including (usually)
GST at 5%, less the GST rebate.

The University's suppliers (vendors) may handle GST in several ways:

 include GST in the sales price but not identify the amount of GST therein
 separately identify the amount of GST
 not collect (i.e. assess) GST

This section addresses each of these situations, and summarizes the buying department's
role with respect to GST.

Other Available References on GST

Each department has been provided with the University of Toronto Goods and Services Tax
Manual, a comprehensive guide to GST. The sections below are an overview of the areas
where questions most often arise.

In addition, technical expertise on this matter is available from Accounting Services,

Financial Services Department, 978-8185.

GST Assessed and Collected by the Supplier

GST Not Assessed by the Supplier

GST Not Applicable

Summary of Buying Department's Role

GST Assessed and Collected by the Supplier

When an assessment of GST is indicated, the supplier must provide the GST registration
number. This is evidence that the supplier is authorized to collect the tax.

Although not specifically set out in the GST Act, discussions with Canada Revenue Agency
indicate that the University has an obligation to report to Canada Revenue Agency any
supplier who is assessing GST without a GST registration number.

1. GST Included

The supplier's invoice or order form states that GST is included in the sale price. The amount
of GST is not specifically identified.

If there is no Ontario Sales Tax (OST), the amount of GST is determined by multiplying the
total invoice amount by 5/105.

If the invoice states that both GST and OST (@ 8%) are included in the sale price the
amount of GST is determined by multiplying the total invoice by 5/113.

These calculations are handled automatically by the system (FIS), so the user only needs to
ensure the appropriate tax code is used.

2. GST Extra (or "shown")

GST is separately identified on the supplier's invoice.

3. GST Rebate

The cost to the department is the total invoice price less the GST rebate and can be
calculated as:

 total invoice - (5/105 X .67 X total invoice)

 or simplified: total invoice - (.0319 X total invoice)

GST Not Assessed by the Supplier

This may occur because:

 GST is not applicable

 GST is applicable but the supplier is not collecting the tax

GST Not Applicable 

There are two categories of purchases which are not subject to GST:

1. GST exempt

An exempt supply is a supply of goods or services for which there is no requirement to

collect and remit GST.
The most common reason for an exemption is the small trader status of the supplier. A
supplier has that status if its sales of taxable supply do not exceed $30,000 annually.

2. Zero-rated supply

A zero-rated supply is a supply taxed at the rate of zero.

See GST Not Applicable below for examples of exempt and zero-rated items.

GST Applicable - Foreign suppliers 

The most common situation in which GST is applicable but has not been assessed by the
supplier, other than GST exempt situations, is the case of foreign suppliers. This does not
mean that all foreign suppliers do not assess GST. Some foreign suppliers are registered and
do collect GST.

When goods, as distinct from services, are purchased from a foreign supplier, these items
must pass through Customs. Acting as an agent of Canada Revenue Agency, Customs
assesses and collects GST where appropriate.

Buying departments should always instruct foreign suppliers to include their invoice with the
shipment of goods. Customs can then determine whether the supplier is assessing GST. If
the supplier is assessing GST but this is not evident, Customs may assess it as well,
resulting in a duplicate GST cost to the buying department. (also refer to Courier,
Brokerage & Freight Payments)

University Approach 
The onus is on the supplier to assess and collect GST. Therefore, the University does not
self-assess GST except if the University purchases services which are performed outside
Canada, but the benefit is realized in Canada these services are GST taxable unless clearly
exempt, e.g. small trader exemption.

Where the University does self-assess GST, the cost to the department is the total invoice
price plus GST at 5% less the GST rebate. The net calculation is: total invoice x 1.0165

GST Not Applicable

Zero-rated Purchases 
The following are examples of purchases taxed at the rate of zero. Therefore, the seller (the
supplier / vendor to the University) is not required to collect GST on these sales.

 prescription drugs
 medical devices
 basic groceries other than alcohol, snack foods, sweetened baked goods, restaurant
meals and take-out foods
 agricultural and fishing supplies including:
o fresh fish and other marine animals for human consumption livestock,
o poultry, raw wool and certain agricultural produce
o certain machinery and equipment designed for farmers or fishermen
 exports of goods and services
 international passenger travel services
  international freight transportation services
 supplies made to international organizations and officials including diplomats and
member of visiting armed forces
 certain financial services
 initial sales or importations of precious metals

Exempt Purchases 
The following are examples of purchases exempt from GST:

 goods and services provided by small suppliers

 health care, child care and legal aid services
 educational services provided by elementary and secondary schools, publicly funded
colleges and universities, and private secretarial schools and business colleges
 a broad range of supplies of a non-commercial nature by charities, non-profit
organizations, municipalities, and federal and provincial governments
 sales of used residential housing and rentals of residential premises
 most domestic financial services
 certain intra-group financial services
 ferry, road and bridge tolls

Summary of Buying Department's Role

Supplier's GST Registration Number 
When a supplier invoice/order form indicates that GST is being assessed, ensure the
supplier's GST registration number is provided. If it is not, contact the supplier for the
number.

Indicate GST Status 

When processing a certified invoice or other non-purchase order related payment in FIS,
always indicate the GST status (refer to the Reference Guide - Tax Codes).

Note to Departments: The cost of purchases on all FIS reports is net of the GST rebate. 

Last revision: January 9, 2008

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Taxation
 > Financial Services Department > Services > Taxation

This page provides a common access point to information relating to the various taxation
that impacts the University in carrying out its mission. This page also provides you with links
to relevant sections in the Guide to Financial Management (GTFM) relating to taxation.

The following current sections in the GTFM specifically deal with taxation:

 Employment versus Contractor / Taxation of Payments (HRIS vs FIS) [Human

Resources, Payroll and Benefits]
 Goods and Services Tax (GST) [Purchasing and Payments to Vendors]
 GST - University Sales [External Revenues and External Expense Recoveries]
  HST TransitionImpact of HST at the UofT

The following are reminders and guidance regarding specific tax issues and processing in
FIS:

 Correct GST Treatment for Consulting Services, Electronic Subscriptions,

Licenses and Conferences

For more information on PST, please refer to the Procurement Services website

For more information on GST, please contact Accounting Services, Financial Services
Department at 978-8185.

Last updated: March 20, 2007