Difference between GST and HST

  • January 10, 2017

The GST/HST is a value added tax that applies to most supplies of goods and services in Canada.  GST/HST is paid on goods or services acquired, imported into Canada, or brought into a participating province for use, consumption, or supply in the course of their commercial or personal activities. GST/HST is applied on daily purchases, business transactions, and covers most facets of every day purchases in Canada. Canada imposes a 5% federal goods and services tax (GST) on taxable supplies made in Canada.

Most provinces also have or had a provincial sales tax.  Four provinces eliminated their provincial sales tax and harmonized it with the federal GST.  In those provinces, the GST is known as the HST.  The HST rates in those provinces are: New Brunswick (13%), Newfoundland and Labrador (13%), Nova Scotia (15%) and Ontario (13%).  The provincial portion of the HST is the amount in excess of the base GST rate of 5%.  The GST/HST is collected by the CRA on behalf of the federal government and those provinces who harmonized their sales tax.

The province of Quebec imposes its own tax, in addition to the federal GST, called the Taxe de ventu du Quebec (“TVQ”).  The current rate is 9.5% but the tax is applied to not only the taxable supply but on the GST as well, making the rate 9.75%. Alberta, Nunavut, The Northwest Territories and the Yukon do not impose any provincial sales tax. The retail sales tax rates for the remaining jurisdictions are: British Columbia (7%), Manitoba (7%), Prince Edward Island (10% – effective 10.5%), and Saskatchewan (5%)

Zero-rated supplies are any item or service indicated by the Federal government that is exempt from GST/HST. Unlike exempt supplies, these are taxed at 0%, and can be claimed as an “input tax credit”, meaning that it applies to rebates under GST/HST guidelines. Both the zero-rated supplies and exempt supply list can be found on the Canada Revenue Agency website. The zero-rated supplies for Canada are:

  • 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;
  • Certain medical devices such as hearing aids and artificial teeth;
  • Exports (most goods and services for which you charge and collect the GST/HST in Canada, are zero-rated when exported); and

Many transportation services where the origin or destination is outside Canada.