An election promise is fulfilled today as the Conservative government cuts the GST (goods and services tax) down from seven per cent to six. It will be the first time in its 15-year history that the general sales tax has been lowered.
Make sure you check your receipts, especially big ticket items, as you purchase items. The GST cut may save the average Canadian a few hundred dollars a year. And for retailers offering expensive goods, the reduction could mean increased sales.
Meanwhile, some municipalities plan on pocketing the savings themselves, saying it would be too difficult to change signage on tax-included services. Parking meters will likely remain the same.
However, hard liquor may get more expensive The government’s maiden budget on May 2 raised excise taxes on tobacco and alcohol, saying it was necessary to maintain so-called “sin taxes.” Beer and wine are to be taxed on a flat, per liter basis. So, cheap lagers will be taxed the same as expensive imported ales.
But the hard liquor excise tax is based on the retail price per bottle. And because excise taxes are set as a percentage of the federal excise tax, the money becomes a big source of revenue for the provinces. Alberta is the only exception.
The Finance Department detailed the savings in an example on its website:
* Imagine that “Monique” and “Sanjeev” each buy an identical new home priced at $200,000 plus GST in the same subdivision.
* Both buyers are scheduled to take possession of their homes in the fall of 2006.
* Monique signs her agreement of purchase and sale with the builder on May 1, 2006. Sanjeev signs his agreement one week later.
* The 6-per-cent GST rate applies if the agreement of purchase and sale is signed after budget day, which was May 2, 2006.
* Buyers who signed the purchase agreement on or before May 2, and whose GST is based on the 7-per-cent rate will be able to claim a transitional adjustment from the Canada Revenue Agency.
* Therefore, Sanjeev ends up paying a total of $207,680 to the builder — $200,000 plus $12,000 in GST minus a rebate of $4,320, which is 36 per cent of the GST paid.
* In comparison, Monique pays a total of $208,960 to the builder — the price of the home plus $14,000 in GST minus the GST housing rebate of $5,040.
* Subsequently, she claims a transitional benefit of $1,280.
Alternatively, consumers can fill out a form called the GST HST 189 form and send it to the Canada Revenue Agency. The form can be found on the agency’s website or by calling 1-866-959-7797.