How GST/HST works

On this page ...

• Types of goods and services
• Goods and services taxable at 7% or 15%
• Goods and services taxable at 0% (zero-rated)
• Exempt goods and services

If you are involved in commercial activities in Canada, you may have to register for GST/HST. If you are a registrant, you have to collect GST/HST from your customers and remit it to us. You can claim input tax credits (ITCs) to recover the GST/HST you pay or owe on purchases and operating expenses you use, consume, or supply in your commercial activities. For example, if you buy taxable goods to resell in your store, you can recover the GST/HST you paid on those goods by claiming an ITC. You cannot claim an ITC to recover the GST/HST you paid or owe on purchases related to supplies of exempt goods and services, or those for personal use.

If you are a GST/HST registrant, you have to send us a GST/HST return at regular intervals. When you complete your return, deduct your ITCs from the GST/HST you charged or collected from your customers. This includes the GST/HST you charged on all goods and services during a reporting period, even if you have not collected the tax. If the GST/HST you charged or collected from your customers is more than your ITCs, send us the difference. If it is less, claim a refund. The difference between what you charged or collected from your customers and what you paid or owe on your business purchases is your net tax. If you qualify to claim a rebate (such as the public service bodies' rebate or the rebate on printed books), deduct that amount from your net tax. For more information on rebates, see "Public service bodies' rebate".

Types of goods and services

For GST/HST purposes, there are three types of goods and services:

• goods and services taxable at 6% or 14% (before July 2006, 7% or 15%);
• goods and services taxable at 0% (zero-rated); and
• exempt goods and services.

Goods and services taxable at 6% or 14%

Most goods and services supplied in Canada are subject to GST/HST at the rate of 6% or 14%. As a registrant, when you supply these goods and services, you usually have to charge GST/HST to your customers. You can claim ITCs for the GST/HST you pay or owe on purchases for use in your commercial activities. Examples of goods and services taxable at 6% or 14% include the following:

• registration fees for conferences, educational seminars, and trade shows;
• theatre subscriptions;
• books and subscriptions to magazines and newsletters;
• mailing list sales;
• advertising services;
• restaurant meals;
• banquet facilities; and
• club memberships, where the main purpose of the club is to provide recreational, dining, or sporting facilities to its members.

Top of page

Goods and services taxable at 0% (zero-rated)

A limited number of goods and services are taxable at the rate of 0%. They are called zero-rated. As a registrant, when you supply zero-rated goods and services, you do not charge GST/HST to your customers, but you can claim ITCs for the GST/HST you paid or owe on purchases you made for use in your commercial activities. Examples of zero-rated goods and services include the following:

• prescription drugs and drug-dispensing fees;
• certain medical devices such as eyeglasses, canes, and wheelchairs;
• basic groceries such as fruits, vegetables, meat, and flour;
• most agricultural and fishery products; and
• exports (most goods and services taxable at 6% or 14% in Canada are zero-rated when exported).

Exempt goods and services

Some goods and services are not subject to GST/HST and have been designated as exempt. You do not charge GST/HST when you supply exempt goods and services, and you cannot claim an ITC for the GST/HST you pay or owe on purchases that relate to the supplies of such goods and services. However, as explained in the section "Public service bodies' rebate", certain qualifying non-profit organizations can claim a rebate for part of the GST/HST paid on expenses for which they cannot claim ITCs. In addition, you cannot register for GST/HST if you supply only exempt goods and services. Examples of exempt goods and services include the following:

• most educational services, and music lessons;
• most health, medical, and dental services performed by licensed physicians or dentists for medical reasons;
• most services provided by financial institutions such as providing loans or mortgages;
• child-care services (day-care services for less than 24 hours per day) provided primarily to children 14 years of age and younger;
• long-term residential accommodation (periods of at least one month) and residential condominium fees;
• residential accommodation if the charge is not more than $20 per day of occupancy; and
• certain goods and services provided by non-profit organizations, governments, and other public service bodies (exemptions regarding non-profit organizations are explained in the section "Exemptions for non-profit organizations").

Note
From a consumer's point of view, there is no difference between zero-rated and exempt goods and services, because no tax is charged 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 claim ITCs.

Taxable and exempt goods and services

Taxable	Exempt
You charge GST/HST	You do not charge GST/HST
You can claim ITCs	You cannot claimITCs

  Previous page | Table of contents | Next page