Quebec Service Tax (QST)

In 1992, the Province of Quebec implemented QST, a hybrid of GST and the old RST, to harmonize RST and GST. Effective January 1, 1998, the majority of goods and services sold or provided in Quebec are taxable at a rate of 7.5%. It is important to note that the GST is included in the tax base when calculating the QST. This results in an effective rate of taxation of 8.025%

How QST works

Goods and services sold in Quebec that are subject to the 7.5% rate of tax or are zero-rated are referred to as taxable.

A limited number of goods and services are zero-rated under the QST. Even though no QST is collected on the sale of zero-rated goods and services, an input tax refund 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
• Agricultural and most fishery products
• Prescription drugs and drug dispensing fees
• Medical devices (hearing aids, wheelchairs, and eyeglasses)
• International and interprovincial transportation services, and other supplies made outside Quebec
• Exports and property shipped outside Quebec

Exempt goods and services

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

The following are some examples of exempt goods and services:

• 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
• Most goods and services provided by non-profit organizations, governments, and other selected public sector organizations

ITR restrictions

QST enables large companies operating in Quebec to claim a QST ITR on their business expenses. For large businesses (all businesses prior to August 1, 1995), the following property and services do not give entitlement to an ITR:

• Road vehicles (weighing less than 3000 kilograms) that must be registered under the Highway Safety Code to be driven on public roads;
• Fuel used in such vehicles, with the exception of non-coloured fuel oil (also called clear diesel fuel) acquired by a large business;
• Electricity, gas, steam or combustibles, except when used to produce movable property intended for sale;
• Telephone services and other telecommunications services, with the exception of "1 800" services, "1 877" services and "1 888" services, and Internet services that constitute telecommunications services;
• Food, beverages and entertainment that are 50% deductible under the Taxation Act.
  * http://www.revenu.gouv.qc.ca/eng/publications/in/in-203-v.asp

For more information on ITR restrictions for large businesses, click here.
<link to ITR pdf COMING SOON >