What Is the Goods and Services Tax (GST) in Canada?
Definition & Examples of the GST
The goods and services tax (GST) is a 5% tax on the supply of most goods and services in Canada. It is charged in every province, either separately or as a part of the harmonized sales tax (HST).
Most Canadian businesses are responsible for collecting remitting the GST or HST on taxable goods and services. Learn more about how this tax works and when it applies.
What Is the Goods and Services Tax (GST)?
The goods and services tax is a consumption tax levied on taxable goods and services across Canada. As a federal tax, it applies in all provinces. However, many provinces charge the harmonized sales tax, which combines the GST with the provincial sales tax (PST). If you are a consumer or business buying or selling taxable goods anywhere in Canada, you'll either be paying the GST or HST at the least, along with other provincial taxes in some cases.
How Does the GST Work?
Most businesses collect the GST at the point of sale and then remit the tax to the Canada Revenue Agency (CRA) monthly, quarterly, or annually, depending on when they are required to file their returns. Businesses must register for a GST/HST account if they make taxable sales and are not small suppliers.
A GST/HST Small Supplier is defined as a sole proprietor, partnership, or corporation whose total taxable revenues before expenses are $30,000 or less in the last four consecutive calendar quarters or a public service body (such as a nonprofit organization) that has total taxable revenues of $50,000 or less in the last four consecutive calendar quarters.
Some businesses are not allowed to claim small supplier status; many taxi and limousine operators, for instance, must register for GST no matter how small their annual income.
How Do I Register and Charge/Remit the GST/HST?
If you do not qualify as a small supplier and provide taxable goods or services, you will need to charge, collect, and remit the GST/HST. You can register for a GST account with the CRA, keep track of the GST/HST that you collect and pay, and complete and file a GST/HST tax return according to your assigned reporting period.
The taxes a business must register to collect and pay will depend on where the business is located as well as where it sells goods and services. The following table details the taxes you must collect depending on where you make sales.
|British Columbia||GST 5% & PST 7%||As of April 1, 2013|
|Manitoba||GST 5% & PST 7%||The provincial sales tax is known as retail sales tax (RST).|
|New Brunswick||HST 15%|
|Newfoundland and Labrador||HST 15%||As of July 1, 2016, the HST rate increased from 13% to 15%.|
|Northwest Territories||GST 5%|
|Nova Scotia||HST 15%|
|Prince Edward Island||HST 15%|
|Quebec||GST 5% & QST 9.975% (QST)|
|Saskatchewan||GST 5% & PST 6%|
Who Must Pay the GST/HST?
As a consumer, you pay the GST/HST on all taxable goods and services, except zero-rated and exempt goods and services. There are always exceptions. Provincial and territorial governments and First Nations people do not always have to pay GST/HST.
To compensate low-income individuals the government may issue a GST/HST credit, a tax-free quarterly payment meant to offset all or part of the GST/HST paid. Some businesses may also be eligible for the input tax credit to apply the costs of doing business toward some of their GST/HST obligations.
Examples of Items That Are Exempt From GST/HST
- Sales of used residential housing (if the owner is not a builder and the building has not been substantially renovated)
- Residential rent (if longer than one-month duration)
- Residential condominium fees
- Medical and dental services—includes doctors, dentists, dental hygienists, orthodontists, optometrists, chiropractors, physiotherapists, audiologists, psychologists, podiatrists, dieticians, and social workers (but not massage therapists)
- College, university, or vocational school courses that lead to a diploma or degree or are required to practice a trade or vocation
- Legal aid
- Music lessons
- Toll charges on ferries, roads, bridges, etc.
- Financial service charges such as bank account fees, loan fees, etc.
- Services provided by local governments, municipalities, charities, and public institutions such as water distribution, sewerage, garbage and recycling collection, licenses and permits, transit, etc.
Examples of Zero-Rated Items
A purchaser does not pay GST on a zero-rated item; however, the seller can claim Input Tax Credits to recover the GST/HST paid on purchases or expenses related to the sale of the item. Examples include:
- Basic groceries, which includes meat, poultry, fish, cereals, milk, eggs, vegetables (fresh, frozen, canned), coffee, tea, etc. (does not include items not necessary for dietary needs, such as snack foods, liquor, sodas, candy, etc.)
- Prescription drugs and dispensing fees (Generally, if the item does not require a prescription and is intended to treat a minor ailment it is not zero-rated)
- Medical devices, including wheelchairs, walkers, canes, guide dogs, hearing aids, artificial teeth or limbs, eyeglasses or contact lenses, asthmatic devices, modifications to motor vehicles to accommodate disabilities, orthotics, etc.
- Certain exported goods and services. Goods must be shipped to a destination outside of Canada.
Nonresident Consumers and the GST/HST
Nonresident consumers cannot recover the GST/HST paid on goods purchased (and taken possession of) in Canada, since it is a standard consumption tax and applies at the point of sale for any consumer. This does not apply if the goods are for commercial use. Likewise, a purchaser who arranges for the vendor to directly ship the goods to an address outside of Canada will not be charged GST/HST.
- The goods and services tax (GST) is a federal sales tax collected by most businesses that sell taxable goods and services anywhere in Canada.
- In addition to (or in place of) the GST, some provinces collect provincial sales tax (PST) or the combined version, known as the harmonized sales tax (HST).
- Any business that does not qualify as a small supplier and sells taxable goods and services must register to collect and remit the GST/HST.
- Most residents and nonresidents who buy taxable goods and services in Canada will pay the GST/HST.