What is GST/HST?
Answer
The federal 5 per cent Goods and Services Tax, harmonised with provincial sales tax in five provinces to form the Harmonized Sales Tax of 13 to 15 per cent.
Explanation
The Goods and Services Tax (GST) is the federal value-added tax of 5 per cent that applies to most goods and services in Canada. It was introduced on January 1, 1991 by the government of Prime Minister Brian Mulroney, replacing the older Manufacturers' Sales Tax which only applied at the factory level. The GST is administered by the Canada Revenue Agency under the Excise Tax Act and is one of the most economically efficient federal taxes, contributing about $50 billion to federal revenue in 2024-2025.
Five provinces have harmonised their provincial sales tax with the federal GST to create a single Harmonized Sales Tax (HST). New Brunswick, Nova Scotia, and Newfoundland and Labrador adopted HST in 1997 at 15 per cent (now 15 per cent in NB and NS, 15 per cent in NL). Ontario adopted HST on July 1, 2010 at 13 per cent. Prince Edward Island adopted HST in 2013 at 14 per cent (now 15 per cent). British Columbia adopted HST in 2010 but reverted to a separate provincial sales tax following a 2011 referendum.
The remaining provinces and territories run their own sales taxes alongside the federal GST. Quebec runs the Quebec Sales Tax at 9.975 per cent, administered by Revenu Québec under a federal-provincial collection agreement. Saskatchewan, Manitoba, and British Columbia run separate Provincial Sales Taxes. Alberta and the three territories (Northwest Territories, Yukon, Nunavut) have no provincial sales tax, so only the 5 per cent GST applies.
Several common categories are exempt or zero-rated under the GST. Basic groceries, prescription drugs, medical devices, residential rents, agricultural and fishing products in primary form, and exports are zero-rated, meaning no tax is collected and businesses can claim input tax credits. Education, healthcare, financial services, and used residential housing are exempt, meaning no tax but no credits. The GST/HST Credit, paid quarterly to lower-income Canadians, offsets the regressive impact of the tax for households below the income thresholds. The temporary GST holiday from December 14, 2024 to February 15, 2025 cleared GST on certain restaurant meals, children's clothing, books, and other items as a cost-of-living measure.
Why this matters for your test
GST/HST appears on almost every receipt every Canadian sees. Recognising the January 1, 1991 introduction and the 5 per cent federal rate gives candidates a confident test answer.
Source: Canada Revenue Agency; Department of Finance Canada
