HST in Ontario – Exempt & Zero Rated Supplies

The Harmonized Sales Tax (HST) has been a reality to Canadians for many years.  This value added tax first started out as the Goods and Services Tax (GST) on January 1, 1991 replacing the Federal Sales Tax (FST), and then transitioned to HST in Ontario on July 1, 2010; yes Canada Day!

Hence we have lived with the HST for a number of years.  Generally HST is charged on all goods and services with the exception of exempt and zero rated supplies.

Exempt & Zero Rated Supplies

Exempt Supplies are items where no HST is charged and include:

i) Residential home resales;

ii) Residential rents and condominium fees;

iii) Most health, medical and dental services;

iv) Child care services (children 14 years of age and under);

v) Legal aid services;

vi) Many educational services and music lessons; and

vii) Insurance and most financial services.

Zero Rated Supplies are items where HST is charged at a rate of 0%, in effect having the same impact to the consumer as exempt supplies.  Zero Rated Supplies include:

i) Basic groceries (e.g. milk, bread, vegetables);

ii) Agriculture products, farm livestock, fish products;

ii) Prescription drugs and dispensing services;

iv) Medical devices, and feminine hygiene products; and

v) Goods and services for consumption outside of Canada (exports to USA).

The distinction between exempt and zero rated supplies are relevant to the business supplying the goods and services.  The business is able to claim credits in the form of HST input tax credits (ITCs) against the zero rated supplies (not exempt supplies), providing the business with either a reduction in HST payable to the Canada Revenue Agency (CRA) or in some circumstances a refund.

It is advisable to seek professional advice to understand the tax laws that impact your particular situation, and to guide you through the complexities of Canadian Income taxes.

AWFS Consulting Inc. offers professional tax, business advisory, and accounting services to clients. The company’s mission is to offer financial leadership and support to clients in this ever-changing economic environment by empowering clients with financial knowledge.