Canadian government announces GST/HST break

Canadian Government Announces GST/HST Break Ahead of Holiday Season

November 24, 2024

The Canadian government announced a GST/HST break on a wide range of groceries, holiday essentials, and more for a two-month period, helping families stretch their budgets during this busy time of year.

“The government can’t set prices at the checkout, but we can give Canadians more money in their pockets,” Justin Trudeau said at a press conference announcing the measures.

The government proposes that the GST/HST be fully and temporarily relieved on holiday essentials, like groceries, restaurant meals, drinks, snacks, children’s clothing, and gifts, from December 14, 2024, to February 15, 2025.

“This tax break will make a meaningful difference for Canadians by making essentially all food GST/HST free, providing real relief at the cash register,” the government said.

What You Need to Know

The holidays can be an expensive time for families, and this initiative is expected to deliver meaningful savings:

$1.6 Billion in Tax Relief: The government estimates that eliminating GST/HST on qualifying goods will save Canadians billions.
Family Savings Example: A family spending $2,000 on qualifying items could save up to $100 in GST alone. For those in provinces with HST (like Ontario and Nova Scotia), that same spending could save up to $260 over the two-month period.

How Will It Work?

Starting December 14, businesses will automatically remove GST/HST on qualifying purchases at checkout. This relief also applies to imported qualifying goods during the same period.

Many businesses, including retail stores and restaurants, will quickly need to review their product lists and make adjustments to their POS systems, all during the busy holiday shopping season.

These are the goods that will qualify for the proposed tax relief:

The following are categories of proposed qualifying goods (You can click here for the complete list and detailed descriptions).

Children’s clothing
Children’s footwear
Children’s diapers
Children’s car seats
Print newspapers
Printed books (some exceptions)
Christmas trees or similar decorative trees, whether natural or artificial
Alcoholic beverages (excluding spirits but including wine, beer, ciders, and spirit coolers up to 7% ABV)
Pop, candy, chips, ice cream, cakes, pastries, pudding, etc.
Prepared salads, sandwiches, platters of cheese, cold cuts, fruit or vegetables, and other arrangements of prepared food
Food and beverages sold by a restaurant, coffee shops, take-out outlets, pubs, food trucks, etc.
Select children’s toys (several conditions)
Jigsaw puzzles
Video game consoles, controllers or physical game media (e.g., a video game cartridge or disc).

What’s Next and Final Thoughts

While this announcement brings welcome news for consumers, it raises several important tax considerations for businesses to monitor.

Key questions remain:

How will the tax holiday be implemented? Will it be treated as a zero-rated supply, an exempt supply, or something else entirely?
What impact will this have on input tax credit claims and cash flow?
Is the current list of qualifying goods final, or could items be added or removed before the legislation is passed?
Will the GST/HST relief apply exclusively to retail sales, or will it cover all sales of qualifying goods?
Are the definitions of qualifying goods clear, or is there room for interpretation and ambiguity?
Should we anticipate similar measures from provinces with PST or QST?

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.