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There has been some discussion over the timing of applying the reduction of the GST in construction progress payments. Although all invoicves issued prior to July 1st should collect 7% GST, this does not apply to requests fior payment which require certification prior to the obligation to pay.

The following is quoted directly from CRA's Memoranda Series, section 19.1 Paragraph 77.

In many cases, construction contracts provide for the contractor to submit requests or applications for payment on a regular basis during the term of the contract. Based on this request or application for payment, another person, often a consultant, engineer or architect, is required to certify the value of the work completed and materials delivered to the time of the request or application and to approve a specific amount for payment. Under the terms of the contract, the recipient of the supply, usually the owner, is required to pay the amount approved within a specific number of days following certification of the value of the work completed. In such cases, the request or application for payment by the contractor will not be considered to be an invoice.

Therefore, GST/HST will be payable on the amount approved on the earlier of the day that the recipient pays the amount approved, the day that the recipient is required to pay the amount approved pursuant to the contract, the day the supplier issues an invoice for that amount, or the date of such an invoice, if issued.

Example For example, a standard stipulated price contract requires the owner (i.e., the recipient of the supply of construction services) to make monthly payments based on the amounts approved by a third-party consultant. Applications for such payments are made by the contractor (the supplier) on a monthly basis as the work progresses. The consultant has 10 days after the date the application for payment is issued either to approve or to amend the application and issue a certificate for payment. The owner is required to pay the amount approved to the contractor no later than five days after the certificate is issued by the consultant. No other documents relating to the progress billing are issued by the supplier.In this case, the contractor's application for payment will not be regarded as an invoice, since the application is merely a request that a certificate for payment be issued pursuant to the contract, and not a document creating an obligation to pay. The certificate, although it establishes the obligation to pay, is not issued by the supplier, but by a third party and, therefore, the amount approved does not become due under subsection 152(1) as the document is not an invoice issued by the supplier. GST/HST liability is triggered by the terms of the contract in accordance with subsections 168(2) and 152(1).

Therefore, the GST/HST becomes payable in respect of a given monthly payment under the contract when that amount is paid or five days after the certificate for payment is issued, whichever is earlier. The latest day that GST/HST will be payable in respect of a given monthly payment under the contract will be 15 days after the application for payment is made by the contractor (i.e., 10 days for the certificate to be issued and five days for the payment to be made). However, if the payment is made before it becomes due under the terms of the contract, then tax will become payable on the day the payment is made.