What does GST INCLUDED Mean?
If you have purchased or are contemplating purchasing a new home, you may have been told that the purchase price of the home includes GST. Although this sounds simple enough there are a number of matters you should be aware of.
The signs that you pass heading into a new home site can be dazzling, especially when there is more than one builder on the site. The prices usually jump out from these signs and perhaps some key elements of the site such as lot size. There may also be smaller language on the sign proclaiming that the dreaded GST is included in these prices.
If you missed this information from the signs the builders' representative will usually mention that GST is included and you need not worry about paying it. While it is true in most cases that there are no other fees owing other than the purchase price, it is not true that the purchaser does not pay it.
The way that builders have dealt with the GST has changed over the years since it was introduced. In the beginning at least some builders calculated what they wanted to sell the house for and then simply advised people that the GST was an extra cost. This made the builders look good in that the purchase price was smaller, however people did not like to see additional costs, especially one as large as this!
Builders then marketed the homes with the full GST included and advised prospective purchasers that they could apply for a rebate of some of the GST if they qualified. Since most purchasers qualify for the rebate if they move into the property, they did not want to pay to the builder the several thousand dollars which the rebate represented, only to wait 15 or more weeks to receive the rebate monies back from the government.
Builders changed again and started to market the property with the NET GST included and that is how most agreements are prepared today. This evolution has led to a schedule to the agreement that is difficult to understand. In essence the agreement states that your price includes the non-rebateable portion of the GST and that you will sign over the rebateable portion to the builder. In this way the purchaser does not pay for the part which will be rebated, and does not receive a rebate back. The agreement also states that if you are not eligible for the rebate, such as if the house will be an investment rental property, you as the purchaser will pay to the builder the rebateable portion of the GST above and beyond the purchase price.
So if the purchase price includes GST, what did you pay for the home and the property? There is a formula to determine this amount and it is this lesser amount which will be stated on the Transfer/Deed. Most purchasers are surprised to see an amount less than the purchase price on the Transfer/Deed, but the advantage is that if you are paying Land Transfer Tax, it is calculated on this lower amount.
Remember that every situation is different and if you have any concern about your rights in a particular situation, you should contact your lawyer.
Bernie Jankowski practices real estate, corporate and estates law in Barrie, Ontario. If you have questions about this article or real estate law in general, write to That's The Law, c/o Toronto Sun, 333 King St. E., Toronto, M5A 3X5.
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