Reliable Accounting & Tax Services

Harmonized Sales Tax (HST) Update

Goods and services taxable at 5% or 13%

Examples of goods and services for which you charge and collect GST/HST include:

• commercial real property and newly built residential real property;
• rentals of commercial real property;
• sales and leases of automobiles;
• gasoline;
• car repairs;
• soft drinks, candies, and potato chips;
• clothing and footwear;
• advertising (unless provided to a non-resident of Canada who is not registered for GST/HST);
• taxi and limousine fares;
• legal and accounting fees;
• franchise fees;
• hotel accommodation; and
• barber and hairstylist services.

Zero-rated goods and services

Examples of goods and services taxable at 0% (zero-rated) include:

• basic groceries such as milk, bread, and vegetables;
• agricultural products such as grain, raw wool, and dried tobacco leaves;
• most farm livestock;
• most fishery products such as fish for human consumption;
• prescription drugs and drug-dispensing services;
• medical devices such as hearing aids and artificial teeth;
• exports (most goods and services for which you charge and collect GST/HST in Canada, are zero-rated when exported);
• many transportation services where the origin or destination is outside Canada; and
• any supply of property or a service that is for the use of the Governor General.

Exempt goods and services

A small number of goods and services are exempt from GST/HST — that is, no GST/HST applies to them. This means that you do not charge your customers GST/HST on your supplies of goods and services, and you do not claim input tax credits (ITCs).

Examples of exempt goods and services include:

• used residential housing;
• long-term residential accommodation (of one month or more), and residential condominium fees;
• most health, medical, and dental services performed by licensed physicians or dentists for medical reasons;
• child-care services (day-care services provided usually for less than 24 hours a day) provided primarily to children 14 years old and younger;
• most domestic ferry services;
• legal aid services;
• many educational services such as courses supplied by a vocational school leading to a certificate or a diploma which allows the practice of a trade or a vocation, or tutoring services made to an individual in a course that follows a curriculum designated by a school authority;
• music lessons;
• most services provided by financial institutions such as lending money or operating deposit accounts;
• arranging for and issuing insurance policies by insurance companies, agents, and brokers;
• most goods and services provided by charities; and
• certain goods and services provided by non-profit organizations, governments, and other public service bodies such as municipal transit services and standard residential services such as water distribution.

GST/HST account

How does GST/HST work?

If you are a GST/HST registrant, you have to charge and collect GST/HST on taxable supplies you make in Canada and file regular GST/HST returns to report that tax. Effective January 1, 2008, under proposed changes to the law, the GST rate will be reduced from 6% to 5%, and the HST rate from 14% to 13%. This proposed change to the law was current at the time of publication. You can claim an ITC on your GST/HST return to recover GST/HST you pay or owe on purchases and expenses you use, consume, or supply in your commercial activities. Usually, commercial activities are those undertaken to provide taxable (including zero-rated) goods and services. From a consumer’s point of view, there is no difference between zero-rated and exempt goods and services, because tax is not collected in either case. However, the difference for you, as a registrant, is that although you do not collect GST/HST on zero-rated goods and services, you can still claim ITCs for the GST/HST you pay or owe on purchases used to provide them.