University of Saskatchewan

Financial Services Division (FSD)

GST - Rate Reduction to 6%


To: Deans, Department Heads and Administrative Assistants
From: Tracey McHardy, Taxation Manager
Date: June 15, 2006
Subject: GST - Rate Reduction to 6% (effective July 1, 2006)

Effective July 1, 2006, the GST rate is reduced to 6%.

Revenue Sales to External Clients:

Units on campus that provide GST-taxable goods and services to external clients must ensure that invoices issued subsequent to June 30, 2006 reflect the new 6% GST rate. One exception is where there has been an undue delay in issuing the invoice. GST may apply at 7% on an invoice issued after June 30, 2006 where the invoice would have been issued prior to June 30, 2006 had it not been for the undue delay.

Conference and other fees paid or invoiced prior to July 1, 2006 attract GST at 7% even if the event is to be held after June 30, 2006

For price adjustments and other credit adjustments, the applicable GST rate on the credit is the same rate as the applicable GST rate on the initial charge. For example, where a customer returns a product subsequent to June 30, 2006 and it relates to a purchase invoiced or paid prior to this date, the GST rate on the credit will be 7%.

There has been no change to the types of goods and services subject to GST. For discussion on the application of GST to specific goods and services, refer to the, Taxation Memorandum on Sales to External Clients and Internal Units, dated July 6, 2004, on Financial Service Division's website at: <old link redacted>.

GST Paid on Purchases:

In general, the transitional rules for purchases are as follows:

  1. For invoices dated before July 1, 2006 - 7% will apply.
  2. For invoices dated after July 1, 2006 - 6% will apply, unless payment was made prior to this date, there was an undue delay in the issuance of the invoice, or where the contract stipulates payment is due on an earlier date. In the latter cases, 7% will apply.
  3. GST applies at 6% on goods imported (or released from Custom controls) on or after July 1, 2006.
  4. For price adjustments and other credit adjustments, the applicable GST rate on the credit is the same rate as the applicable GST rate on the initial charge. For example, where a volume discount is provided subsequent to June 30, 2006 and it relates to purchases invoiced prior to this date, the GST rate on the credit will be 7%.
  5. Special transitional rules apply to the sale of real property and self-assessment of GST on imported goods and services.

    - 7% will apply on holdbacks if the earlier of either the day the holdback is paid or the day the holdback expires is prior to July 1, 2006; otherwise the holdback is subject to GST at 6%.

    - Where the work is substantially completed prior to July 1, 2006, GST will apply at 7%.

    - For imported services, GST is self-assessed at 7% where the earlier of either the date of payment or the due date is prior to July 1, 2006.

Provisions have been put into place to ensure no benefit can be realized by amending contracts entered into on or before May 2, 2006 (e.g., where payment has been delayed that was otherwise payable prior to July 1, 2006 - GST will apply at 7% where the primary reason for the change was to benefit from the GST rate reduction).

The university will continue to recover GST paid at the rate of 67%. Accordingly, the new net GST cost will be 1.98% (down from 2.31%).

CRA has a number of publications relating to the GST rate reduction, including various questions and answers (see CRA's website at: http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html).

If you require further information, please do not hesitate to contact me.


Ms. T. McHardy, CA
Taxation Manager