Goods and Service Tax (GST)

On January 1, 1991, the federal government introduced GST, a multi-stage tax or value added tax that is generally levied at each stage in the production and distribution chain.

How GST works

GST is a tax that applies at a rate of 5% to the supply of most goods and services in Canada. GST registrants are responsible for collecting and remitting the GST/HST charged to customers for taxable goods and services sold or supplied to them.

Registrants are entitled to claim an input tax credit (ITC) to recover the GST/HST paid or owing on purchases and expenses used, consumed, sold, or supplied in their commercial activities.

Different rates apply on taxable goods and services (5% GST or 0% zero-rated). Some sales or supplies are exempt from GST.

Zero-rated supplies

A limited number of goods and services are zero-rated under the GST. Even though no GST is collected on the sale of zero-rated goods and services, an input tax credit can be claimed on business purchases used to provide zero-rated goods and services.

Some examples of zero-rated goods and services include:

• Basic groceries (milk, bread, and vegetables)
• Agricultural and most fishery products
• Prescription drugs and drug dispensing fees
• Medical devices (hearing aids, wheelchairs, and eyeglasses)
• International transportation services, accommodation, and other supplies made outside Canada
• Exports

Exempt goods and services

Sales of certain goods and services are not subject to the GST. No GST is collected on the sale of these items. An input tax credit cannot be claimed for any GST paid or payable on purchases used to provide exempt goods and services.

Some examples of exempt goods and services include:

• Previously-owned or resold residential housing
• Long-term residential rents and residential condominium fees
• Most health, medical, and dental services
• Child care services
• Legal aid services
• Educational services and music lessons
• Most financial and insurance services
• Most goods and services provided by charities