The Department of Finance issued a short-term exemption for Canadians from the Goods and Services Tax and Harmonized Sales Tax (GST/HST) on November 21, 2024. By eliminating the GST/HST on groceries and a few other qualified items for two months, from December 14, 2024, to February 15, 2025 (the relief period), the proposed proposal seeks to give customers financial respite. Although it has not yet been brought into Parliament or administrative guidelines released by the Canada Revenue Agency (CRA), legislation to implement the plan is anticipated to be passed swiftly.
The Government of Canada enacted the legislation to implement the Goods and Services Tax/Harmonized Sales Tax (GST/HST) split on December 12, 2024. The GST/HST break offers tax relief on some daily necessities and runs from December 14, 2024, until February 15, 2025. During the relief period, qualified products imported and purchased in Canada will have the GST/HST completely and temporarily removed. The GST/HST break for products imported through the commercial, postal, traveler, and courier low-value shipment (CLVS) streams will be administered by the CBSA.
Which Items Qualify for GST/HST Break?
The following products would be eligible for the short-term GST/HST exemption:
- Children’s apparel: This includes items such as receiving blankets, bunting blankets, baby bibs, and clothing up to a size 16 for girls or a size 20 for boys.
- Children’s footwear: These are shoes (apart from certain types, like those worn only for sports or leisure activities) made for infants or kids with an insole length of 24.25 centimeters or less.
- Children’s diapers: Items made for infants or kids, such as liners, training pants, rubber pants, and diaper inserts.
- Children’s car seats: Booster seats or restraint systems that meet Canadian safety regulations.
- Print books and newspapers: Newspapers with news, opinion pieces, and feature articles, as well as printed books or their updates.
- Artificial and natural Christmas trees.
- Food or drinks: items meant for human consumption, such as prepared salads, granola items, chips, candy, carbonated drinks, and some alcoholic beverages. The proposed relief covers cooked meals as well as food and drinks served in establishments including coffee shops, pubs, and restaurants.
- Selection of toys: for kids Items like card games, board games, plush toys, dolls, and construction toys are made for kids under the age of fourteen.
- Jigsaw puzzles
- Controllers, video game consoles, or tangible game materials
What Must I Do as a Customer to Qualify for this Tax Break?
You should immediately be eligible for this tax savings at checkout as a customer on qualified purchases. When you purchase qualified items between December 14, 2024, and February 15, 2025, no GST or HST should be applied. Generally speaking, unless you are inadvertently charged GST or HST on a qualifying item, you do not need to keep your receipts. In that case, just request a GST/HST refund from the shop or supplier.
What Businesses Should Know About?
Companies are not allowed to charge GST/HST on eligible goods and services between December 14, 2024, and February 15, 2025. During this time, every link in the supply chain—from manufacturer to distributor, wholesaler to seller, and retailer to customer—is eligible for the GST/HST exemption. The Canada Revenue Agency (CRA) will approach compliance pragmatically.
How To Be Eligible for the GST/HST Exemption?
If a person or business meets all of the following eligibility standards, they will be eligible for the GST/HST relief when they import products into Canada within the tax break period:
- During the relief period, the CBSA received customs information about the products that qualify for the GST/HST break (this might be a customs broker or courier firm, a trade chain partner, working on your behalf).
- Throughout the relief period, the items are physically present in Canada and have been released by the CBSA (i.e., cleared by customs) for delivery to the importer.
- The products must be delivered and presented to customs via Canada Post and commercial carrier/courier services. GST/HST relief is not available for goods that were not granted access by the CBSA during the relief period but were bought between December 14, 2024, and February 15, 2025.
Important Factors To Consider
There weren’t many details in the Department of Finance’s news release about the proposed proposal. Affected retailers should think about the following while we await draft legislation, CRA administrative guidelines, and other information:
Implementation and Compliance
At checkout, be ready to apply the interim GST/HST reduction changes. This entails checking product tax classification against the list of eligible products, getting ready to upgrade point-of-sale systems to eliminate GST/HST on eligible products, and making sure employees are instructed on the new protocols. However, how quickly and successfully firms may adopt these changes may be constrained by the short timescale for making these modifications and offering training, particularly for smaller businesses with fewer resources or enterprises with complex point-of-sale systems.
Record-keeping and Documentation
To guarantee that the temporary tax break is followed, keep thorough records of all sales transactions throughout the relief period. This entails recording the sale of qualified items as well as the GST/HST relief that was utilized. For auditing purposes and to prevent future conflicts with the CRA, proper documentation will be essential. Additionally, because the relief period begins and ends in the middle of the month, be ready for the December 2024 and February 2025 monthly GST/HST reports to be more complicated.
Customer Interaction
Affected shops must be ready to inform their customers about the GST/HST reduction as soon as more information is available to guarantee a seamless transition.
Import of Qualifying Goods
Businesses and/or consumers who import qualifying goods during the relief period must be aware of the relief and adhere to the required documentation and reporting demands to prevent overpayment of GST/HST upon importation into Canada. This is because the relief will also apply to the importation of qualifying goods throughout the relief period. Since the import GST/HST is typically paid by the broker on the importer’s behalf, importers may need to carefully examine the import documents created by the customs broker.
The proposed policy aims to put “more money in Canadians’ pockets” for consumers. Due to a lack of knowledge on specific subjects, companies who must offer the temporary GST/HST exemption are likely to face the following difficulties:
The Extent of the Impacted Entities
Businesses will be anticipated to drop the GST/HST on qualifying goods “at the checkout” and “at the cash register,” according to a news release from the Department of Finance. The measure is intended to put “more money in your pocket,” which suggests that it is intended for retail (b2C) sales rather than wholesale sales, which occur earlier in the supply chain. How this will be accomplished is unclear, though, and the alleviation might be applicable across the supply chain.
Extent of Qualifying Goods
There are also questions about whether some commodities, particularly those not explicitly specified in the Excise Tax Act, qualify for exemption even if the government has supplied a list of qualifying goods. For instance, it could be difficult to determine whether some mixed-use products—such as those that are suitable for both adults and children—qualify. Other items, such as how to decide if a toy is “designed for use by children who are under fourteen years of age,” might be arbitrary or subject to interpretation in the absence of explicit instructions.
Complex scenarios:
Despite the measure’s seeming simplicity and breadth, complex situations will require consideration and attention. For instance,
- Supplies of qualified products that are “delivered to the purchaser and paid for” within the relief period are to be covered under the proposed regulations. How do the proposed regulations apply when products ordered online are delayed in delivery, meaning that the actual delivery takes place outside of the relief period, and what does “delivery” mean?
- When the relief has been taken out of POS systems, how should POS systems be set up to handle returns or exchanges of goods that were delivered during the relief period (and granted relief) and returned after the relief period?
The goal of this short-term GST/HST break is to provide Canadians with a substantial financial boost over the holiday season. However, putting this interim remedy into practice will be difficult for most organizations. After the law is introduced in Parliament and the government issues further guidelines, impacted companies should be ready to move swiftly.
ClearWealth, Your Partner in Navigating Tax Breaks
For Canadians, the GST/HST break is a much-needed respite providing financial flexibility in these hard times. By comprehending how this tax reduction works and effectively utilizing it, individuals and corporations can stretch their finances further and concentrate on what counts. These tax laws serve as a reminder of how crucial it is to remain informed and make wise financial decisions to prosper in a shifting economic environment. Our goal at ClearWealth is to make your financial journey easier. Our professionals are committed to helping you maximize your financial resources, from negotiating tax benefits to thorough financial planning. Get in touch with ClearWealth right now, and together, we can map out a course for your financial prosperity! Call us at (437) 290-5117 or email us at info@clearwealth.tax to get more information.
