1. The Harmonized Sales Tax (HST) is a combination of the federal Goods and Services Tax (GST) with the Provincial Sales Tax (PST).
  2. It is a value-added tax that applies to most goods and services in provinces like Ontario, New Brunswick, Nova Scotia, and Prince Edward Island.
  3. Each province may have its own specific HST rate which means the HST rate varies by province.
  4. Businesses registered for HST can claim ITCs to recover taxes paid on purchases related to their commercial activities, which can significantly reduce their overall tax burden.

Understanding HST in Canada: Exempt, Zero-Rated, and Taxable Items

  1. Taxable Items (HST Charged)

These items are subject to the standard HST rate:

  • Tangible Goods: Most products, including electronics, clothing, and household items.
  • Services: Professional services (legal, accounting), personal services (haircuts, cleaning), and digital services (software, subscriptions).
  • Prepared Foods: Meals purchased at restaurants, snack foods, and soft drinks.
  1. Exempt Items

These items are not subject to HST at all:

  1. Basic Groceries: Most food items purchased for home consumption, such as fruits, vegetables, dairy, and meat.
  2. Health Care Services: Most services provided by licensed medical professionals, including doctor and dentist visits.
  3. Educational Services: Tuition fees for primary, secondary, and post-secondary education.
  4. Certain Financial Services: Loans, mortgages, and most insurance policies.(refer page 3)
  5. Child Care Services: Many child care services are exempt.
  6. Used Residential Real Estate: The sale of used residential properties is generally exempt.
  1. Zero-Rated Items

These items are taxable but at a rate of 0%, allowing businesses to claim Input Tax Credits (ITCs):

  1. Exported Goods: Goods sold to customers outside Canada.
  2. Certain Food Items: Basic groceries.
  3. Prescription Drugs: Medications sold by pharmacies that require a prescription. (refer page 3)
  4. Medical Devices: Certain medical devices prescribed by healthcare professionals may be zero-rated.
  5. Transportation Services: International passenger transport and certain domestic passenger transport services, like public transit. (refer page 3)
  6. Book Sales: Most printed books are zero-rated.
  7. Certain Services to Non-Residents: Some services provided to non-residents of Canada may be zero-rated.
  • Which domestic passenger transport services zero rated HST?

In Canada, certain domestic passenger transport services are zero-rated for HST purposes, meaning they are taxable at a rate of 0%. Here are the primary categories:

  1. Public Transit Services: This includes services provided by buses, subways, and trains operated by municipal or regional transit authorities.
  2. Taxi and Limousine Services: When these services are provided to individuals for travel within Canada, they may qualify for zero-rating under specific conditions.
  3. Commercial Airlines: Passenger transport services provided by airlines for flights that are entirely within Canada may also be zero-rated.
  4. Ferry Services: Certain ferry services operating between locations within Canada, particularly if they are not part of a larger commercial operation.
  5. Certain Charter Services: Charter flights or transport services that meet specific criteria may also be zero-rated.

It’s important for businesses involved in these services to keep detailed records and ensure compliance with the regulations set by the Canada Revenue Agency (CRA). If you have questions about specific circumstances, consulting with a tax professional is advisable.

  • Which Prescription Drugs sold by pharmacies are exempt from HST?

In Canada, prescription drugs sold by pharmacies are generally exempt from HST. Here are the key points regarding the exemption:

  1. Prescription Medications: Any drug that requires a prescription from a licensed healthcare professional including medications prescribed for various health conditions.
  2. Over-the-Counter Medications: Most over-the-counter medications are not exempt from HST and are subject to the standard tax rate, except for certain specific items that may be classified as exempt based on their use or classification.
  3. Medical Supplies and Devices: Some medical supplies and devices prescribed by healthcare professionals, such as insulin syringes or certain durable medical equipment, may also be exempt.
  4. Homeopathic Medicines: Depending on their classification and usage, certain homeopathic medicines might also be exempt from HST.
  5. Exceptions: It’s important to note that not all health-related products sold in pharmacies are exempt. Items like cosmetics, dietary supplements, and most over-the-counter products are typically taxable.
  • Which Financial Services are exempt from HST.

In Canada, several financial services are exempt from the Harmonized Sales Tax (HST). Here’s a list of common exempt financial services:

  1. Loans and Mortgages: Interest on loans and mortgages provided by financial institutions.
  2. Depository Services: Services related to bank accounts, such as maintaining deposits or withdrawals.
  3. Insurance Services: Most insurance policies (life, health, property, etc.).
  4. Investment Management: Fees for managing investments, such as mutual funds or portfolio management.
  5. Securities Transactions: The buying and selling of stocks and bonds, including related advisory services.
  6. Credit Card Services: Charges related to credit card services, such as fees for processing payments.
  7. Certain Financial Advising Services: Services provided by financial advisors related to investment planning or retirement planning are often exempt, though this can depend on specific circumstances.