Understanding GST/HST – Taxable, Zero-rated, and Exempt supplies

GST/HST Canada
  • by admin
  • December 6, 2023

An understanding of these items may help you to avoid an accidental risk of your GST/HST liability. If you are supplying a taxable item and not charging GST/HST, considering it is exempt or zero-rated, you may have GST/HST obligation. Even though you did not charge GST/HST to your customer, CRA will consider your sales collection as inclusive of GST/HST.

The article below gives you an idea of whether your product or services are taxable, zero-rated, or exempt. If you are already registered for GST/HST you must charge GST/HST as per the applicable rate. Please click the link GST/HST Rate to know about the rates by province. These rates may not be up to date and you may need to contact a tax professional to confirm this. If you are new to GST/HST or a business startup and want to learn more about GST/HST and the registration requirements and benefits, click the link GST/HST in Canada.

Taxable supplies

A taxable supply is a supply of goods or services where the GST/HST rate applies. If your business is registered for GST/HST purposes, you need to charge GST/HST to your customer. A taxable supply becomes a zero-rated supply when the same goods or services are exported outside Canada.

Here are some of the major categories of supplies that are taxable supplies.

  • Commercial rental of real property
  • sales or lease of commercial real property
  • Sales of a new residential house if it has not yet been used for residence
  • Car repairs and maintenance services
  • Sales, rental, and leases of automobiles
  • Charges for taxis, limousines or uber like services
  • Foods that are Ready to eat or drink, like candies, potato chips and soft drinks,
  • Clothing, footwear, cosmetics
  • Furniture, utensils, decorative
  • Hairstylist and barber services
  • Advertising or designing or publishing services
  • Accounting and professional fees
  • Franchises fees
  • Hotel accommodation or rental accommodation for less than 30 days

Zero-rated supplies

A zero-rated supply of goods or services has 0% GST/HST on the item. The beauty of these supplies is that if you are involved in selling these items, you are eligible to claim ITC. ITC is the amount of GST/HST that you have paid in manufacturing or procuring these items, including all overheads.

  • Essential groceries such as bread, milk, butter, and vegetables. Generally, these items are not yet ready to eat. Usually, you cook them before eating.
  • Most farm animals or poultry products or fish for human consumption
  • Farming products such as rice, lentils, grain, raw wool, etc.
  • Some of the medical devices such as artificial teeth and hearing aids
  • Drugs that are prescribed and dispensing services
  • Womanly hygiene products
  • Transportation charges when goods are exported from Canada or imported from outside Canada
  • Air fair, bus or railway tickets, etc. when either the starting or ending destination is outside Canada
  • Most of the taxable supplies of goods and services when you export them out of Canada


Exempt supplies

Exempt supplies are neither taxable nor zero-rated. If you supply these items, you will not be able to claim ITC.

  • Residential house when last used as a place of residence
  • Residential rents (rented for more than one month)
  • Residential condominium fees
  • Most medical, health, and dental services performed for medical reason by a licensed doctor or dentist
  • Services for childcare supervision for children under the age of 14 years and for less full 24 hours in a day
  • Ferry services in domestic water
  • Financial services like interests, bank charges, insurance premium, etc.
  • Legal assistance services
  • School or University fees where they provide a degree or diploma to enable student to practice in a trade or vocation
  • Tutoring services for a course approved by a school authority
  • Lessons for music
  • certain services and property provided by governments, municipalities, non-profit organizations, and other public service bodies including transit services provided by municipal and services such as residential water distribution
  • most services and property provided by public institutions and charities

The item listed above are not comprehensive. These are only major categories to give you an idea. You may need to contact your tax professional or RKB Accounting to determine you GST/HST obligation. Please act now before its too late.


Disclaimer: Information in the blog/post/article has been presented for a broad and simple understanding. This is not legal advice. RKB Accounting & Tax Services does not accept any liability for its application in any real situations. You need to contact your accountant or us for further information.


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