Tax & Trade Blog

Since the GST was first implemented in 1991, a continual source of misconception has been that the GST represents a single tax.  In fact, there are potentially four different applications of the GST – i.e., reflected in Divisions II through IV.1 of the Excise Tax Act (“ETA”). When combined with the provincial HST component, further permutations can occur.

A major source of work (because of mistakes made by Canadian residents and non-residents alike) has been the application of Divisions II and III of the ETA, which are reviewed here, and which can quite counterintuitively result in the application of both a 5% GST and up-to a 15% GST/HST on one single supply of goods.  Effectively, tax applying twice on a single transaction!

As we wrote in a previous blog post, the federal government amended subsections 256.2(3.1) and (3.2) of the Excise Tax Act (the “ETA”) to introduce an enhanced GST/HST residential rental property rebate applicable to new purpose-built rentals (the “Enhanced Rebate”), which took effect on September 14, 2023.

On July 17, 2024, the Real Property (GST/HST) Regulations (the “Regulations”) were published in the Canada Gazette, providing guidance on the implementation of the Enhanced Rebate, including the prescribed conditions and definitions of eligible properties.

Bill C-69, which received Royal Assent on June 20, 2024, contains various amendments to implement the federal government’s 2024 Budget.  In this blog, we discuss a small but important amendment:  supplies of certain face masks, respirators and face shields are no longer classified as zero-rated supplies!

Background – Zero-Rated Supplies

Section 165 of the Excise Tax Act (the “ETA”) generally imposes the GST/HST on recipients of taxable supplies made in Canada.  Zero-rated supplies are a subset of taxable supplies which are taxed at the rate of 0%.  Common examples of zero-rated supplies include basic groceries, prescription medications, and some medical devices.