GST/HST

Cost of Goods and Services Tax in Canada

The goods and services tax is a tariff on the production and supply of goods and services, and it’s charged at 5%. For example, if you purchase a shoe for your kid at the price of C$100, you’ll need to pay the total cost of C$105 to the seller. The extra C$5 is the GST. Revenu Quebec is in charge of GST collection in Quebec while the Canada Revenue Agency collects the GST for every other territory and province.

Exempted Goods and Services

Almost all goods and services in Canada pay the GST.  However, certain services and goods are eligible for exemption. These include:

  • Legal aids services
  • Daycare services for children younger than 15 years old
  • Toll bridges and ferry tolls
  • Music lessons
  • Many services in the financial sector including mortgages and loans
  • Goods and services offered by charities and a few non-profits
  • Processes for the issuance of insurance policies by agents, brokers, and insurance companies
  • Vocational school programs that enable candidates to receive a diploma for a vacation or trade

The list is inexhaustible. Suffice it to say there are quite a few goods and services explored from paying GST.

Other Taxes

There are other taxes Canadians pay apart from GST. Some of these are:

Income Tax: tax you pay on your wage, revenue, income, or salary.

Sales Tax: The tax that’s added on the goods or services you buy.

Property Tax: a tax that homeowners are required by law to pay.

Excise Tax: Tax that is levied on specific classes of goods, which include Gasoline, Alcoholic Beverage, and Tobacco products.

History of GST

The GST is a value-added tax introduced by the government of Prime Minister Brian Mulroney. It took over the place of the Manufacturers’ Sales Tax, which had a charge of 13.5%. Over several decades, the GST rate has fluctuated from the initial price of 7% to its current rate of 5%. It is also refreshing to note that a few provinces combine the GST with provincial sales tax (PST). The combination of both is known as the Harmonized Sales Tax. These provinces are:

  • New Brunswick
  • Nova Scotia
  • Newfoundland and Labrador
  • Ontario

Harmonized Sales Tax

As stated earlier, the Harmonized Sales Tax is a combination of the Federal GST and the provincial PST. Despite this, the agency responsible for the collection of the HST is the CRA. Once collated, the Canada Revenue Agency remits the appropriate funds to the provinces. HST is as a result of the Federal Government’s effort to convince provinces to discard the provincial tax measures and follow a blended tax system to foster competition amongst Canadian businesses.

Despite federal government pressure, the HST remains to be implemented across all provinces in Canada.

GST/HST Credit

The GST/HST credit is a tax-free payment by the federal government to assist individuals with low threshold income. The credit reimburses them partially or entirely for the monies they pay through the GST/HST. You can find further information on the CRA website here.

Eligibility for GST/HST Credit

Any individual may be eligible for the GST/HST credit if that individual resides in Canada for tax purposes for the month before and at the beginning of the month in which the CRA disburses payment. Further eligibility criteria include:

  • Individuals must be 19 years or older.
  • You were or are in a marital or common-law relationship.
  • You were or are a parent who lived or lives with your child.

Implementation of HST by Provinces and Territories

  • The provinces of New Brunswick, Newfoundland, and Labrador, Nova Scotia, implemented the HST in 1997.
  • Ontario implemented the HST on the 1st of July, 2010.
  • Prince Edward Island implemented the HST on the 1st of April, 2013.
  • British Columbia was a part of the HST system until a referendum on the 1st of July, 2010, to convert back to the PST/GST.
  • Quebec, Saskatchewan, and Manitoba routinely use the PST. Quebec also has the QST, which is the acronym for the Quebec Sales Tax.
  • Yukon, Nunavut, Alberta, and the Northwest Territories do not implement the HST because they do not charge a provincial sales tax.

Province/ Territories and their Taxes

  • Northwest Territories: GST 5%
  • Nunavut: GST 5%
  • Yukon: GST 5%
  • British Columbia: GST 5%. PST 7%
  • Saskatchewan: GST 5%. PST 5%
  • Alberta: GST 5%.
  • Manitoba: GST 5%. RST* 7%
  • Quebec: GST 5%. QST 9.975%
  • New Brunswick: HST 13%
  • Ontario: HST 13%
  • Prince Edward Island: HST 15%
  • Nova Scotia: HST 15%
  • Newfoundland & Labrador HST 15%

*Retail Sales Tax

Difficulty in Implementing GST

If you look above, you’d see provinces and territories charge different taxes on goods and services. Because of this, there’s a challenge for Canadian businesses to sell products and services across various provinces and territories. For instance, if your business is in Nova Scotia and you’re shipping to Quebec rather than charge the 15% HST, you’ll charge 5% GST and 9.975% QST.

Fortunately, HST/RST/GST/PST is not charged on goods or services to be consumed outside Canadian jurisdiction. A Canadian business that manufactures products in Manitoba may still ship to Ontario without an HST/RST/GST/PST if the goods are to be further shipped outside Canada.

GST/HST Credit & COVID-19

Due to the pandemic, eligible individuals will receive a one-time increase in their GST/HST credit. The benefits increases from:

  • C$443 to C$886 for single individuals
  • C$580 to C$1160 for married couples and common-law spouses
  • C$153 to C$306 per child, 18 years and below. This payment excludes the first eligible child of a single parent
  • C$290 to C$580 per first eligible child of a single parent

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