Goods and Services Tax - GST

What is a 'Goods and Services Tax - GST'

The goods and services tax (GST) is a Canadian value-added tax levied on most goods and services sold for domestic consumption. The tax is levied to provide revenue for the federal government. The GST is paid by consumers, but it is levied and remitted to the government by businesses selling the goods and services.

BREAKING DOWN 'Goods and Services Tax - GST'

The GST is often expressed as "GST/HST" because the GST is combined with a provincial sales tax known as the Harmonized Sales Tax in the "participating" provinces of New Brunswick, Nova Scotia, Newfoundland and Labrador, Ontario and Prince Edward Island. Certain essential goods and services, such as groceries, prescriptions and medical services, are GST exempt. Tax-exempt items are taxed at 0% and are referred to as "zero-rated" supplies.

Most Canadians pay GST/HST on the major goods and services they buy. Members of Canada’s First Nations and some territorial and provincial government entities, however, are exempt from GST/HST on taxable goods. Businesses, known to Canada’s Revenue Authority as registrants, charge consumers GST/HST. To ensure payment of the tax in a timely manner, CRA requires most registrants to pay GST/HST on a quarterly basis. New businesses, known as new registrants, can pay the tax on Canada’s tax filing deadline, April 30.

Examples of Zero-Rated Goods

While Canadians pay GST/HST on most goods and services, some goods are exempt. Zero-rated goods include groceries such as bread, milk and produce; products from the country’s agricultural sector, such as grain, wool and tobacco leaves; and prescription medications. Necessary medical devices, such as hearing aids and dental prostheses, are tax exempt. Livestock, fish for consumption, and some transportation services are also tax exempt. Canadians typically do not pay GST/HST for their residences, unless they are brand new, and for health services, child care and legal services. The country also does not levy the tax on tolls inside of Canada and on educational services such as tutoring.

GST/HST Tax Credit and Rebates

Canada sends eligible tax filers ages 19 and older a GST/HST tax credit on a quarterly basis. In 2014, the government began sending eligible tax filers the credit automatically. For this reason, accountants often advise Canadians to file tax returns even when they have no income to report, so that they can receive the credit. Canadians can register on CRA’s website to receive their GST/HST tax credit by direct deposit and to view their benefit via a mobile app provided by the tax agency. Individuals and businesses can also apply for GST/HST rebates on certain goods and services, such as purchasing or building brand new structures.