Question 1

Briefly describe the simplified method of accounting for input tax credits.

Accepted Answer

Under the simplified method of accounting for input tax credits, detailed records are not kept of the GST/HST that is paid on all purchases other than real property. The total GST/HST and non-refundable PST inclusive amount of fully taxable costs incurred, including eligible costs incurred for capital assets other than real property, is multiplied by a factor to arrive at the figure that will be used for input tax credits in the GST/HST return of the registrant.
The factor used will depend on the GST/HST rate in the province (e.g., 5/105 in Alberta, 15/115 in New Brunswick). As with the regular method of calculation, separate attention is given to the GST/HST paid on real property. This means that this amount will have to be prorated based on the extent to which it is used in commercial activity.

Question 2

John is a resident of Ontario where a 13 percent HST rate is in effect. He is acquiring a new car from a car dealer and is being given a trade-in allowance for his old vehicle. Explain how the HST will apply to John's purchase.

Accepted Answer

HST will only be levied on the net cost of the new car. The 13 percent rate will be applied to the cost of the new car, less the trade-in allowance provided.

Question 3

How are input tax credits calculated when registrants purchase capital expenditures that are (1)real property and (2)furniture and fixtures?

Accepted Answer

For capital expenditures on real property, the GST/HST paid is eligible for an input tax credit at the time of purchase. However, if the property is not used exclusively for commercial activity, only a portion of the GST/HST is eligible for the credit. The portion is based on the extent to which the property is used for commercial activity. This is subject to a minimum rule (there is no input tax credit if the property is used 10 percent or less for commercial activity)and a maximum rule (100 percent of the GST/HST paid is eligible for the credit if the property is used 90 percent or more for commercial activity).
For most capital expenditures other than real property (capital personal property), the GST/HST paid is eligible for an input tax credit at the time of purchase. However, if the property is used 50 percent or less for commercial activity, no credit is available. Alternatively, if the property is used more than 50 percent for commercial activity, 100 percent of the GST/HST paid is eligible for an input tax credit.

Question 4

Give two examples of entities that would have to file a GST or HST return, but do not have to file an income tax return.

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Question 5

Describe the "place of supply" rules as they apply to (1)tangible goods other than real property, and (2)services.

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Question 6

Explain how the GST/HST registration requirements apply to non-residents.

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Question 7

Describe the "last four calendar quarters" test that is used to determine eligibility for the small suppliers exemption.

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Question 8

Explain the difference between an accounts-based value added tax and invoice-credit value added tax.

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Question 9

Describe two factors that have been influential in the increased use of transaction taxes in various countries around the world.

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Question 10

Indicate two situations where the fact that two companies are associated would influence GST/HST procedures.

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Question 11

Certain qualifying registrants can use the Quick Method of accounting for GST/HST. What are the advantages of using this method?

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Question 12

GST amounts are included in revenues, expenses, assets, and liabilities of most business enterprises. How should these amounts be dealt with in the financial statements of these enterprises?

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Question 13

What is the objective of the employee/partner GST/HST rebate?

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Question 14

A person with taxable sales of less than $30,000 in the previous calendar year has asked your advice as to whether he should register for GST/HST purposes. What questions should you ask him about his business in order to give the appropriate advice?

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Question 15

Describe the GST/HST consequences related to the sale of:
• fully taxable goods and services;
• zero-rated goods and services; and
• exempt goods and services.

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Question 16

What is the basic problem with a multi-stage tax that is assessed on turnover at the various stages of the production/sale cycle?

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Question 17

Under what circumstances would an entity choose to file a GST or HST return more frequently than required by the Excise Tax Act?

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Question 18

How are input tax credits calculated on the current expenditures of a business?

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Question 19

Provide two examples of expenditures where available input tax credits are restricted, even when the expenditures involved commercial activity.

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Question 20

Briefly describe the advantages, from the point of view of business organizations, of an HST system as compared to a combined GST/PST system.

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Quiz 21: Gst-Hst