The Canada Revenue Agency has updated this policy statement, which discusses whether GST/HST is applicable to gift certificates under the Excise Tax Act (“ETA”). This revision replaces the previous version issued February 20, 1996. The policy statement does not apply to the supply of a telephone card used to obtain a telecommunication service or a meal plan that meets the conditions set out in section 13 of Part III of Schedule V of the ETA.
Under section 181.2 of the ETA, the sale or issuance of a gift certificate (including a gift card) for a specific consideration is deemed not to be a supply, and therefore, is not subject to GST/HST.
When a gift certificate is redeemed, it is treated as consideration towards the purchase of goods or services, and GST/HST may apply at the time of redemption, depending on the tax status of the supply. When a gift certificate is redeemed for a taxable supply, the supplier of the goods or services must determine whether the amount accepted as payment towards the total consideration charged for the taxable supply includes or excludes an amount of tax.
The policy statement illustrates the application of section 181.2 with ten examples of various types of gift certificates and vouchers that are commonly offered. Examples discussed include the treatment of deal-based vouchers offered through popular websites such as Groupon and Wag Jag and gift cards redeemable for downloaded material, such as music or video games.