Goods and Services Tax (GST) is a multi-level value added tax
introduced on January 1, 1991, by Prime Minister Brian Mulroney and Finance
Minister Michael Wilson. The GST replaced a hidden 13.5% Manufacturers’
Sales Tax (MST); Mulroney claimed the GST was implemented because the MST hurt
the manufacturing sector's ability to export and also replaced the Federal
Telecommunications Tax of 11%.The introduction of the GST was very
controversial. As of May 18th, 2010, the GST rate is 5%.
The European model has
helped to become the
Canada’s economy more efficient and competitive with lower-priced goods in the
international market. However, the effects of the GST in this realm are quite
modest, and are regularly swamped by large changes in the exchange rate. The
transparent nature of the GST has kept Canadians acutely aware of their
Conservative Party of Canada reduced the tax by 1% (to 6%) on July 1, 2006 as
part of an election promise. They again lowered it to 5%, effective January 1,
2008. This reduction was included in the Final 2007 Budget Implementation Bill
(Bill C-28), which received Royal Assent on December 14, 2007.
the goods and services tax or GST is a federal tax of five percent on most
goods and services sold in
for domestic consumption. Some goods and services are exempt from GST. These
products are called zero-rated goods and services.
The Federal Goods and
Services Tax (GST) is collected by the Canada Revenue Agency (CRA). GST is a
tax that applies at a rate of 5% to the supply of most goods and services in
. Three provinces (
) harmonized their provincial sales tax with GST to create HST. HST applies to
the same base of goods and services as GST, but at a rate of 13%. Of this, 5%
is the federal part and 8% is the provincial part.
Some specific products and services are exempt from GST. Such as
- Most health, medical, and dental services performed
by licensed physicians or dentists for medical reasons;
- Child-care services;
- Long-term residential accommodation;
- Most goods and services provided by charities etc.
Several situations would require rebates, such as:
Amounts paid in error;
- Being a registered aboriginal
person, tribal council member or band employed employee;
- Specified services supplied to
an investment plan or segregated fund;
- Non-resident recipient of a
taxable supply of an installation service.
Indian bands, and unincorporated band-empowered entities do not pay GST/HST on
GST/HST on taxable goods and services must be paid by diplomatic
missions, consular posts, international organizations, diplomatic agents,
consular officers, and designated officials of international organizations.
They are however eligible to claim a GST/HST rebate, by filling out a GST/HST
The number of
goods and services that are not exempt from GST is a lot more than those which
income segments of the population, while not exempt from paying GST, may be
eligible to receive quarterly GST credits. The GST/HST credit is a tax-free
payment that helps offset all or part of the GST or HST paid.
Sales Tax (PST) is also called Retail Sales Tax (RST). In
this tax is called QST. The tax is collected at the provincial level. Each
province could charge consumers differently. The following list shows the
current rates. The rates could change in the future.
does not collect provincial sales tax)
Prince Edward Island
Provinces calculate PST on
the original prices of the goods and/or services. The only exception is
which adds up GST first and then calculates PST
Three Canadian provinces
Nova Scotia, and New Brunswick
do not collect PST. They instead collect HST or Harmonized Sales tax which
currently sits at 13%.
also intends to collect HST instead of
GST+PST starting from July 1, 2010 but yet it is a debatable issue. The
Harmonized Sales Tax replaces the combination of GST and PST. To make the
matters worse there are some goods and or services that only GST apply to them
or they are exempt from both GST and PST. To reduce the level of complexity
Federal government encourages provinces to use HST which is a single tax that
replaces both GST and PST.
To sum up
the above there is still controversy in
on the implementation of the HST.