On November 21, 2024, the Government of Canada announced a proposal to temporarily relieve taxable food items and other qualifying goods from the GST/HST for two months, commencing on December 14, 2024, and ending on February 15, 2025.
The proposed relief will apply to both the GST and provincial component of the HST and is intended to help Canadians save on purchases made during the holiday season. The projected savings for consumers—and corresponding reduction in federal government tax revenue—from this measure are estimated to be $1.6 billion.
Businesses selling qualifying items will be instructed to not charge GST/HST at the point of sale during the tax holiday. This leaves only a few weeks for a wide range of retailers to adjust their billing systems to reflect the new, temporary tax status of the supplies described below.
In summary, the following categories of goods will be eligible for the GST/HST relief:
- Most food and beverages for human consumption, including groceries, prepared food and beverages, snack items, and alcoholic beverages (excluding spirits, but including beer, wine, ciders, and spirit coolers up to 7% alcohol by volume);
- Children’s clothing, footwear, diapers, and car seats;
- Certain children’s toys;
- Printed newspapers, books, and qualifying audio books;
- Christmas trees;
- Jigsaw puzzles for all ages; and
- Video game consoles and certain accessories.
Numerous food and beverage items are already free of GST/HST under existing zero-rating provisions for basic groceries, and certain participating provinces provide point-of-sale rebates for the provincial component of the HST on other items. However, the proposed tax holiday will substantially expand GST/HST relief to include many previously taxable items. For example, almost all food and beverages, including restaurant and take-out meals, will not be subject to GST/HST during the two-month period. Note that the GST/HST relief will apply to both purchases and imports of eligible goods.
For further details on what is eligible for GST/HST relief under the proposal, please refer to the Department of Finance Canada backgrounder, “More money in your pocket: A tax break for all Canadians.”
At present, it is unclear if this targeted tax relief will affect business-to-business transactions. However, the proposed relief is not expected to impact a supplier’s entitlement to GST/HST input tax credits. Ryan will continue to monitor this development and provide further guidance to businesses as more information becomes available.
In addition to the GST/HST relief, the government has proposed a $250 tax-free Working Canadians Rebate to be paid in the spring of 2025. This rebate will be available to all Canadians who worked in 2023 and whose annual net income was no more than $150,000, subject to certain conditions. More information on the rebate can be found in the backgrounder, “More money in your pocket: The Working Canadians Rebate.”
Both proposals will require enacting legislation to be passed in Parliament.
If you have any questions about how the temporary GST/HST relief might impact your organization or the new rebate for individuals, please do not hesitate to contact Ryan TaxDirect® at 1.800.667.1600 or taxdirect@ryan.com.