Questions and Answers about the GST/HST tax break for all Canadians

GST/HST Notices - Notice 340
December 2024

Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Tax Act (ETA), and all references to the Regulations are to the Deduction for Provincial Rebate (GST/HST) Regulations. The information in this publication does not replace the law found in the ETA and its regulations.

If this information does not completely address your particular situation, you may wish to refer to the ETA or relevant regulation, or call GST/HST Rulings at 1‑800‑959‑8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, explains how to obtain a ruling or an interpretation and lists the GST/HST rulings centres.

If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1‑800‑567‑4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.

For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1‑855‑666‑5166.

GST/HST rates

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province.

Table of Contents

• Questions and Answers
  • What is the eligible period?
  • What is subject to the GST/HST tax relief?
  • What does zero-rated mean?
  • Does the zero-rated treatment only apply to retail sales of qualifying goods?
  • What is an eligible supply of qualifying goods?
    • What determines when a supply is made?
    • What happens when a customer returns a qualifying good that was purchased before the eligible period in exchange for another qualifying good during the eligible period?
    • What should I do if a supplier charges me the GST/HST on an eligible supply during the eligible period?
    • Do shipping/delivery services in respect of qualifying goods also qualify for zero-rated treatment?
    • What happens if a particular transaction includes the provision of a qualifying good and a non-qualifying good together?
  • Will the importation of qualifying goods that are zero-rated be relieved of the GST/HST?
  • Will qualifying goods that are brought into a participating province (that is, a province with HST) during the eligible period be subject to HST self-assessment?
• Items subject to point-of-sale rebates in respect of the provincial portion of HST in participating provinces
  • For items that are children's clothing, children's footwear, children's diapers, children's car seats, printed books or qualifying newspapers that qualify for the point-of-sale rebates, do the same items receive the zero-rated treatment during the eligible period?
  • What are children's clothing?
  • What are children's footwear?
  • What are children's diapers?
  • What are children's car seats?
  • What are printed books?
  • What are qualifying newspapers?
    • Certain magazines and periodicals that qualify as a printed book and certain qualifying newspapers are supplied as subscriptions. Do these supplies qualify for zero-rated treatment during the eligible period?
• Selected children's toys, jigsaw puzzles and video-game consoles, controllers and physical game media
  • Which children's toys qualify?
    • Designed for use by a child under 14 years of age for learning or play purposes
    • Games
    • Toys
  • Which jigsaw puzzles qualify?
  • What are qualifying video game consoles, video game controllers and physical game media?
    • Video Game Consoles
    • Video Game Controllers
    • Video Games
• Christmas Trees or Similar Decorative Trees
  • What are Christmas trees or similar decorative trees?
• Qualifying Food and Beverages
  • Which supplies of food and beverages qualify for zero-rated treatment during the eligible period?
    • Which foods and non-alcoholic beverages qualify for zero-rated treatment during the eligible period?
    • For businesses that sell energy bars, protein bars, ready-to-consume energy drinks, and/or ready-to-consume protein drinks, will these be subject to the zero-rated treatment during the eligible period?
    • Which alcoholic beverages are eligible beverages?
    • Which services of providing, preparing and serving food, non-alcoholic beverages and eligible beverages qualify?
    • When will the zero-rating apply to qualifying services related to the provision of food or beverages?
    • Do the various fees charged by establishments in connection with the provision of qualifying services related to the provision of food or beverages also qualify?
    • What happens regarding supplies that include qualifying services and non-qualifying services?
    • Is the supply of the provision of food and beverages at an establishment a single supply or two or more supplies?
    • If a chef supplies their services of preparing and serving food during the eligible period is the supply zero-rated?
    • Are gift baskets zero-rated during the eligible period?
    • Are wine kits and beer kits zero-rated during the eligible period?
  • If a business uses the factor method for claiming ITCs during the fiscal year how will the zero-rated treatment applying to most supplies of food and beverages impact a business' choice to apply the factor method?
  • Does the GST/HST tax relief also apply to the First Nations goods and services tax (FNGST)?
    • Will the GST/HST tax relief also apply to the First Nations tax (FNT)?
    • If a supplier did not charge the FNGST or FNT on qualifying items from December 14, 2024 to February 15, 2025, can they still claim ITCs related to those qualifying items?
    • Does the GST/HST tax relief apply on reserves where there is no FNGST or FNT?
  • Will CRA apply audit discretion in circumstances where a business has made a concerted effort to meet its tax obligations during the eligible period however may have incorrectly treated some supplies as zero-rated and the recipient is entitled to full ITCs?

Questions and Answers

1. What is the eligible period?

The eligible period means the period beginning on December 14, 2024 and ending on February 15, 2025 as defined in section 1 of Part XI of Schedule VI.

2. What is subject to the GST/HST tax relief?

The following qualifying items are relieved of the GST/HST during the eligible period:

• the following items that are subject to point-of-sale rebates in respect of the provincial portion of HST in certain participating provinces:
  • children's clothing
  • children's footwear
  • children's diapers
  • children's car seats
  • printed books
  • qualifying newspapers
• select children's toys
• jigsaw puzzles
• video-game consoles, controllers and physical game media
• Christmas trees or similar decorative trees
• certain supplies of food and beverages for human consumption not otherwise already zero-rated or exempt

3. What does zero-rated mean?

Part XI of Schedule VI zero-rates supplies of qualifying goods and services as described above during the eligible period. Zero-rated means that no GST/HST is charged when the supply is made, as the tax rate is 0%. However, a GST/HST registrant can claim an input tax credit (ITC) for the GST/HST paid or payable on expenses made to provide zero-rated supplies.

4. Does the zero-rated treatment only apply to retail sales of qualifying goods?

No, the zero-rated treatment applies to any supply of qualifying goods made during the eligible period.

5. What is an eligible supply of qualifying goods?

In accordance with section 1 of Part XI of Schedule VI, an eligible supply of goods (for example, children's clothing or a printed book) is defined to mean a supply (other than an exempt supply) made no later than the end of the eligible period if the following conditions are met:

• all of the consideration for the supply is paid during the eligible period; and
• the property is delivered or made available to the recipient during the eligible period.

Under section 2 of Part XI of Schedule VI, if a supplier retains a common carrier or consignee on behalf of the recipient to ship qualifying goods to the recipient, the property is deemed to be delivered to the recipient at the particular time that the supplier transfers possession of the property to the common carrier or consignee and the property is deemed not to be delivered or made available to the recipient at any other time. By the same measure, if a supplier sends the property by mail or courier to the recipient, the property is deemed to be delivered to the recipient at that particular time that the property is sent.

If a recipient pays a deposit before the eligible period for qualifying goods that are delivered or made available to the recipient during the eligible period, and the supplier applies the deposit to the consideration during the eligible period, those qualifying goods are eligible for zero-rated treatment as the payment of a deposit does not constitute consideration for the supply.

5A. What determines when a supply is made?

In accordance with section 133, where an agreement is entered into to provide property or a service, the entering into of the agreement shall be deemed to be a supply of the property or service made at the time the agreement is entered into. Therefore, if a supplier and a recipient enter into an agreement before the end of the eligible period (that is either before or during the eligible period) to supply a qualifying good, the supply is zero-rated if:

• all of the consideration for the supply is paid during the eligible period; and
• the property is delivered or made available to the recipient during the eligible period.

5B. What happens when a customer returns a qualifying good that was purchased before the eligible period in exchange for another qualifying good during the eligible period?

During the holiday season, it is understood that items purchased as gifts during the holidays may often be returned after the holidays in exchange for other similar items such as a different size or a different colour or an entirely different item.

Where a supply of a qualifying good was made before the eligible period and the good is returned to the supplier, there may be an adjustment of the GST/HST from the supplier to the recipient. In accordance with subsection 232(2), where goods are returned to the supplier for a full or partial refund of the consideration, the supplier may

(a) adjust the amount of tax charged but not collected by subtracting the portion of tax that was calculated on the amount by which the consideration was reduced, where tax calculated on the consideration or part was charged but not collected; and

(b) credit or refund the tax collected on the portion of the consideration or part that was reduced, where tax calculated on the consideration or part was collected.

In these circumstances, if the customer purchases a similar item during the eligible period with the refunded consideration and the supply is an eligible supply of qualifying goods, the supply is zero-rated.

5C. What should I do if a supplier charges me the GST/HST on an eligible supply during the eligible period?

If a supplier charges the GST/HST on eligible supplies during the eligible period, the supplier must include that tax amount in the calculation of their net tax on their GST/HST return, and pay that net tax if there is a balance owing, according to the regular rules.

You may either go to the supplier to get a refund or credit, or you can file a rebate claim with the CRA for the tax paid in error if the amount exceeds $2.

5D. Do shipping/delivery services in respect of qualifying goods also qualify for zero-rated treatment?

No, freight transportation services such as couriers or other shippers are not zero-rated under Part XI of Schedule VI. These services continue to be subject to the GST/HST unless otherwise zero-rated under Part VII of Schedule VI.

5E. What happens if a particular transaction includes the provision of a qualifying good and a non-qualifying good together?

The general principles of the GST/HST continue to apply during the eligible period. This includes determinations of whether a particular transaction is a single supply or two or more supplies. Where a transaction contains several elements including the provision of a qualifying good, a determination needs to be made in the matter and guidance on making such determinations can be found in GST/HST Policy Statement P-077R2, Single and Multiple Supplies. If it is determined that the transaction constitutes a single supply and the nature of that single supply is the provision of a qualifying good, the supply is considered to be a supply of the qualifying good and the supply is zero-rated during the eligible period.

6. Will the importation of qualifying goods that are zero-rated be relieved of the GST/HST?

Yes, where qualifying goods are imported during the eligible period, the imported goods will be relieved of the GST/HST pursuant to section 6.1 of Schedule VII.

7. Will qualifying goods that are brought into a participating province (that is, a province with HST) during the eligible period be subject to HST self-assessment?

No, where qualifying goods are brought into a participating province during the eligible period, the qualifying goods will not be subject to the HST self-assessment pursuant to section 15.1 of Part I of Schedule X.

Items subject to point-of-sale rebates in respect of the provincial portion of HST in participating provinces

8. For items that are children's clothing, children's footwear, children's diapers, children's car seats, printed books or qualifying newspapers that qualify for the point-of-sale rebates, do the same items receive the zero-rated treatment during the eligible period?

Yes, if these items qualify for point-of-sale rebates in respect of the provincial portion of HST in participating provinces, they also qualify for zero-rated treatment during the eligible period. Suppliers that currently apply these point-of-sale rebates to these items, can treat these same items as zero-rated if they are an eligible supply based on the rules. 

9. What are children's clothing?

As defined in section 1 of the Regulations, the following goods are children's clothing:

• garments (other than garments of a class that is used exclusively in sports or recreational activities, costumes, children's diapers or children's footwear) that are

(a)    designed for babies, including baby bibs, bunting blankets and receiving blankets;

(b)    children's garments

(i)    designed for girls and of a size not greater than the size that is girls' size 16 according to the national standard applicable to the garments,

(ii)    designed for boys and of a size not greater than the size that is boys' size 20 according to the national standard applicable to the garments, or

(iii)    if no national standard applies to the garments, designed for girls or boys and having a size designation of extra small, small, medium or large; or

(c)    hosiery or stretchy socks, hats, ties, scarves, belts, suspenders, mittens and gloves in sizes and styles designed for children or babies.

No national standard applies to children's garments. On that basis, children's garments that will qualify are those designed for girls or boys and having a size designation of extra small, small, medium or large.

Children's clothing such as sports jerseys, scout uniforms, and snowboarding pants and jackets that can reasonably be worn for use outside of sports or recreational activities, qualify for zero-rated treatment during the eligible period.

Dancewear such as dance skirts, pants, shorts, leg warmers, leotards, unitards, bodysuits, and tights that can reasonably be worn for use outside of dance activities, qualify for zero-rated treatment during the eligible period. Dance is considered to be a recreational activity. Therefore, any items of dance clothing that are of a class that is used exclusively in dance do not qualify for zero-rated treatment. Tutus and tutu ensembles, and dance costumes do not qualify for zero-rated treatment during the eligible period. The nature of items such as dance skirts, pants, shorts, leg warmers, leotards, unitards, bodysuits, tights, and ghillies for example, is such that they could reasonably be worn for purposes that are not exclusively for dance. As a result, these items qualify for zero-rated treatment during the eligible period. Note that dance accessory items such as make-up, jewellery, or hairnets are not clothing and therefore, do not qualify.

Dual purpose traditional swimwear that can be worn by children outside of a swimming environment, like boys' swimming trunks and girls' one or two piece swimsuits, qualify for zero-rated treatment during the eligible period. However, specialized swimwear like wetsuits, is considered to be designed exclusively for sports or recreational activities and therefore, does not qualify for zero-rated treatment.

The following goods also do not qualify for zero-rated treatment:

• adult sized garments even if acquired for a child
• costumes
• garments of a class used exclusively in sports or recreational activities

10. What are children's footwear?

As defined in section 1 of the Regulations, the following goods are children's footwear that qualify for the zero-rated treatment during the eligible period:

• footwear designed for babies; and
• footwear designed for girls or boys with an insole length of 24.25 centimetres or less.

Footwear such as tennis shoes that can reasonably be worn outside of sports or recreational activities, also qualifies for zero-rated treatment during the eligible period.

The following goods do not qualify for zero-rated treatment:

• footwear with styles designed for girls or boys that have an insole length greater than 24.25 centimetres
• footwear labelled and sold for adults that have an insole length of 24.25 centimetres or less, even if acquired for a child
• footwear such as soccer cleats, bowling shoes, skates, inline skates, diving flippers, or ski boots, that is used exclusively in sports or recreational activities

Dance is considered to be a recreational activity. Therefore, any items of dance footwear that are of a class that is used exclusively in dance do not qualify for zero-rated treatment. Ballet point shoes, tap shoes and flamenco shoes do not qualify for zero-rated treatment during the eligible period.

The nature of items such as ballet slippers, jazz shoes, for example, is such that they could reasonably be worn for purposes that are not exclusively for dance. As a result, these items qualify for zero-rated treatment during the eligible period. Note that dance accessory items such as ballet or point shoe ribbon, toe spacers, or cushion inserts for shoes are not footwear and therefore, do not qualify.

Footwear that is specially designed for use by an individual who has a crippled or deformed foot or other similar disability is already zero-rated (that is subject to the GST/HST at the rate of 0%) when sold on the written order of a person that is entitled under the laws of a province to practise the profession of medicine, physiotherapy, occupational therapy, chiropody, podiatry or a registered nurse.

11. What are children's diapers?

As defined in section 1 of the Regulations, children's diapers that qualify for the zero-rated treatment during the eligible period are diapers that are designed for babies or children, and that are:

• cloth or disposable diapers;
• diaper inserts or liners;
• training pants; or
• rubber pants designed for use with any of the above items.

The following goods do not qualify for the zero-rated treatment:

• adult sized diapers even if acquired for a child
• children's diapers provided as part of a diaper service

Incontinence products specially designed for use by individuals with a disability are already zero-rated.

12. What are children's car seats?

As defined in section 1 of the Regulations, children's car seats that qualify for zero-rated treatment during the eligible period are restraint systems or booster cushions that conform to the Canada Motor Vehicle Safety Standards 213 (Child Restraint Systems), 213.1 (Infant Restraint Systems), 213.2 (Booster Seats) or 213.5 (Restraint Systems for Infants with Special Needs), as described under the federal Motor Vehicle Restraint Systems and Booster Seats Safety Regulations.

The following goods do not qualify for the zero-rated treatment:

• children's car seats and car booster seats that do not meet the Canada Motor Vehicle Safety Standards
• travel systems, which are a combination of stroller, carrier and car seat sold as a single package

13. What are printed books?

The following items qualify for zero-rated treatment during the eligible period:

• a printed book as defined in subsection 259.1(1) (section 4 of Part XI of Schedule VI)
• an update of a printed book (section 4 of Part XI of Schedule VI)
• an audio recording all or substantially all of which is a spoken reading of a printed book (section 5 of Part XI of Schedule VI)
• a bound or unbound printed version of scripture of any religion (section 6 of Part XI of Schedule VI)
• a composite property as defined in section 1 of the Regulations (section 7 of Part XI of Schedule VI)

A printed book is defined in subsection 259.1(1). The term printed book has its ordinary meaning subject to several specific exclusions. For example, printed books do not include:

• magazines and periodicals that are not purchased by subscription
• magazines and periodicals purchased by subscription that have more than 5% of their printed space devoted to advertising
• books designed primarily for writing on, such as address books, diaries, journals, notebooks, and crossword and other writing activity books
• colouring books, scrapbooks, sticker books, sketchbooks and albums for photographs, stamps or coins
• brochures, pamphlets, catalogues and advertising material
• warranty booklets and owner's manuals
• agendas and calendars
• certain directories and collections of street or road maps
• cut-out and press-out books
• collections of patterns, stencils, or blueprints
• programs for events or performances
• rate books

A supply made by electronic means such as e-books is a supply of intangible personal property (IPP). Customers who order e-books are being provided with the right to use the electronic file. IPP does not meet the criteria of a printed book. As such, e-books do not qualify for the zero-rated treatment during the eligible period.

An audio recording all or substantially all (90% or more) of which is a spoken reading of a printed book qualifies for the zero-rated treatment during the eligible period. Qualifying audio recordings include recordings that are the reproduction of the text of a book in audio form (for example, a cassette, compact disc, and reel-to-reel tape). A recording that represents a summarized or abridged version of a printed book also qualifies. An audio version of a book that includes minimal commentary, analysis, or interpretation in addition to the text of the book, or additions that are not incorporated into the narrative (for example, brief opening or closing comments or music) also qualifies.

A recording of excerpts from a published book qualifies for the zero-rated treatment during the eligible period; a recording based on an unpublished manuscript does not.

CD-ROMs and DVDs generally do not contain only auditory information but usually also have textual and visual information in addition to an audio component. For this reason, CD-ROMs and DVDs are not considered audio recordings of printed books and do not qualify for the zero-rated treatment during the eligible period.

The supply of a downloadable audio book (often referred to as e-audio books) is considered to be the supply of a right to access an audio recording, which is a supply of IPP. These are distinguished from an audio recording that is considered to be TPP, which is on tangible medium such as a cassette, CD or reel-to-reel tape. IPP does not meet the criteria of an audio recording of a printed book. As such, e-audio books do not qualify.

Purchases of bound or unbound printed versions of scripture of any religion qualify for the zero-rated treatment during the eligible period. Qualifying religious scriptures are writings such as the Koran, the Bible, prayer books, missals, hymn books, and Torah scrolls, whether bound or unbound. Illustrated versions of religious scriptures (for example, comic book versions) are also included.

A composite property is defined in section 1 of the Regulations to mean property that is wrapped, packaged or otherwise prepared for sale as a single product the only components of which are a printed book and

(a)    a read-only medium that contains material all or substantially all of the value of which is reasonably attributable to one or more of the following:

(i)    a reproduction of the printed book, and

(ii)    material that makes specific reference to the printed book and its content and that supplements, and is integrated with, that content; or

(b)    if the product is specially designed for use by students enrolled in a qualifying course, a read-only medium or a right to access a website, or both of them, that contains material that is related to the subject matter of the printed book.

A qualifying course is a course that is exempt under Part III of Schedule V or would be exempt if the supplier had not made an election to make the supply taxable.

For more information, refer to GST/HST Memoranda 13-4, Rebates for Printed Books, Audio Recordings of Printed Books and Printed Versions of Religious Scriptures, and GST/HST Info Sheet GI-065, Point-of-Sale Rebate on Books.

14. What are qualifying newspapers?

A qualifying newspaper is defined in section 8 of Part XI of Schedule VI to apply the definition of a qualifying newspaper set out in section 1 of the Regulations. Section 1 of the Regulations defines a qualifying newspaper to mean a print newspaper (other than a flyer, insert, magazine, periodical or shopper) that contains news, editorials, feature stories or other information of interest to the general public and that is published at regular intervals.

Qualifying newspapers do not include the following:

• electronic and digital publications
• flyers
• inserts
• magazines
• periodicals
• shoppers

14A. Certain magazines and periodicals that qualify as a printed book and certain qualifying newspapers are supplied as subscriptions. Do these supplies qualify for zero-rated treatment during the eligible period?

A qualifying good is an eligible supply for zero-rated treatment where:

• all of the consideration for the supply is paid during the eligible period; and
• the property is delivered or made available to the recipient during the eligible period.

Administratively, where a printed book or qualifying newspaper is supplied via subscription and a portion of the printed books or newspapers are delivered or made available during the eligible period, the proportion of the subscription that relates to the goods delivered or made available to the recipient during the eligible period would satisfy the requirement. 

Selected children's toys, jigsaw puzzles and video-game consoles, controllers and physical game media

15. Which children's toys qualify?

In accordance with paragraph 10(a) of Part XI of Schedule VI, there are several specific categories of products or toys that qualify under this category when they are designed for use by a child under 14 years of age for learning or play purposes.

The two main categories of products that fall under paragraph 10(a) of Part XI of Schedule VI are:

• games
• toys

Designed for use by a child under 14 years of age for learning or play purposes

A product is considered to meet the requirements of section 10 to the extent that the product is marketed, designed, and intended for use by children under 14 years of age. Consideration will be given to the marketing or packaging of the product, age recommendations, the size and functionality of the product, and any legal requirements or safety features related to the use of the product by children.

For example, the type of advertising, slogans, language, visual representations, themes etc., associated with a particular product may be indicative that the product is intended for or may be reasonably expected to be for use primarily by children under 14 years of age for purposes of learning or play. As an example, a product that is marketed using imagery appealing to kids (for example, cartoons) may be indicative that the product is intended for children.

Where a product is specifically marketed, for example, for ages 8 and up, it would qualify. Where such items are not specifically marketed to adults and the item can, by its nature, be an item that could be used by a child under 14 years of age for learning or play purposes, the item will qualify as being designed for use by a child under 14 years of age. The rules are based on the nature of the product and not the specific retail customer. If an item, based on the packaging and the nature of the item is such that it is an adult toy, for example marked as for 18 years and older, it doesn’t matter if the particular customer is purchasing it for the use by a child under 14 years of age, it will not qualify. Similarly, if an item is not specifically marketed to adults and the item can, by its nature, be used by a child under 14 years of age for learning or play purposes, the item will qualify even if the particular customer is purchasing it for the use by an adult.

Learning generally means the acquisition of knowledge or skills through experience, study or by being taught. Play generally means to engage in an activity for enjoyment and recreation. Many products that are used by children can have a dual purpose one of which includes learning or play. However, section 10 requires that a product must be designed for learning or play purposes. In that respect, a primary purpose test must be applied to a product.

Games

Definition

A game is not defined in the ETA. In general, a game can be considered to be a structured type of play, usually undertaken for entertainment or fun, and sometimes used as an educational tool. They can be played alone or in teams and generally involve mental or physical stimulation, skill, chance and competition. Key components include goals, rules, challenges, and interaction.

Application

Subparagraph 10(a)(i) of Part XI of Schedule VI sets out that a game (other than a video game) that is a board game, a card game or another game that is played using one or more physical components with a structured set of goals and rules qualifies when the game is designed for use by a child under 14 years of age for learning or play purposes.

In addition, playing cards, dice or a replacement, refill or supplemental component of a qualifying game also qualifies pursuant to subparagraph 10(a)(ii) of Part XI of Schedule VI when they are designed for use by a child under 14 years of age for learning or play purposes.

Examples of items that are excluded:

• collector cards unless they are part of a qualifying game
• hockey cards unless they are part of a qualifying game
• casino playing cards that are not designed for use by a child under 14 years of age

Toys

Definition

The terms toy, toy set or toy system are not defined in the ETA. In the general sense, a toy is a plaything used by an infant or a child and often used as an instrument in a game. A toy set is two or more toys put together and sold in a bundled package. A toy system is a kit of individual toy pieces that interact together to serve a common purpose such as a construction set.

To determine if something is a toy, toy set, or toy system some direction can be provided in the Canadian Customs Tariff classification that governs how certain products should be categorized for global importation purposes. Classification in heading 95.03 is generally used for categorizing toys for children. Products that are not considered to be included in Customs Tariff heading 95.03, generally do not meet the definition of a toy, toy set, or toy system for GST/HST purposes. These items are not zero-rated during the eligible period.

These items related to children's items can be found in other Tariff Code classifications including (but not limited to):

• Heading 94.03 – Furniture for children including cribs, toddler beds, cradles, play enclosures for children
• Heading 95.04 – Video game consoles (addressed elsewhere in Part XI of Schedule VI)
• Heading 95.06 - Equipment and articles for exercise, gymnastics, sports and athletics including
  • 9506.40 – table tennis equipment and articles
  • 9506.40 – lawn tennis rackets
  • 9506.61 – Balls such as tennis balls, basketballs, soccer balls
  • 9506.70 – Ice skates, roller skates
  • 9506.91.20 – Trampolines
  • 9506.91.30 – Swimming pools and wading pools including inflatable pools
  • 9506.91.50 – Playground equipment including bouncy castles
  • 9506.91.70 – Snowshoes, sleds, bobsleds, toboggans
• Heading  95.07 - fishing rods and similar products
• Chapter 61 – Children's clothing and sports apparel including protective components such as pads or padding
  • although some items may qualify as children's clothing and be subject to zero-rated treatment on that basis
• Heading  49.03 – Children's picture, drawing or colouring books
  • although they may be printed books and be subject to zero-rated treatment on that basis
• Heading 88.06 - Drones
• Heading 87.12 – Children's bicycles and other cycles

Although the items listed in these above categories may not be toys, there may be a toy that imitates one of these items. For example, a small wooden table and chairs that is furniture for use by a child for eating and sitting is not a toy. However, a play set table and chairs that is designed for play qualifies as a toy.

If it still remains unclear whether a particular product is a toy for GST/HST purposes, the following criteria should be applied to make a determination:

• Place of selling – toys are usually sold in toy stores or the toy section of a retailer's store
• Target audience of the manufacturer's packaging or marketing – the product must be designed by the manufacturer to attract children for the product's play or learning purposes
• Price – toys are usually sold for less than any similar adult use items
• Size – toys are usually smaller sized versions of non-toy products
• Items that are within the reach of children – decorative wall or ceiling items are typically not toys

Application

Dolls, Plush Toys and Soft Toys or its Accessories

Subparagraph 10(a)(iv) of Part XI of Schedule VI sets out that a doll, plush toy or soft toy or its accessories qualifies to the extent that it is designed for use by a child under 14 years of age for learning or play purposes.

Examples of items that are included:

• baby or fashion dolls and all of the accessories
• teddy bears including those you build and all of the accessories

Examples of items that are excluded:

• collectible dolls such as porcelain dolls or figurines that are not primarily designed for learning or play purposes
• action figures marketed for adults as they are not primarily designed for use by a child under 14 years of age

Toys that imitate another person or thing

In accordance with subparagraph 10(a)(iii) of Part XI of Schedule VI, a toy, toy set or toy system that imitates another item, whether real or imaginary qualifies to the extent that it is designed for use by a child under 14 years of age for learning or play purposes. The legislation provides a list that confirms that items that are imitated by a toy qualify. The list includes:

• an animal
• building
• clothing
• food
• household items
• imaginary or fantastical creatures
• jewellery
• machines
• musical instruments
• personal care items
• plants
• real or fictional characters
• tools
• vehicles
• workplace items

Examples of items that are included:

• toy cars and other vehicles
• toy farm kits
• toys guns including water pistols and foam dart guns

Toys that involve creating, building, assembling, sorting, stacking or organizing

In accordance with subparagraph 10(a)(v) of Part XI of Schedule VI, a toy, toy set, or toy system qualifies when they are designed for use by a child under 14 years of age for learning or play purposes and it involves:

• building, creating or assembling structures, objects or models by using pieces, parts, materials or modelling compound, or
• sorting, stacking or organizing pieces, parts or materials.

Model sets such as train sets that are marketed for adults do not qualify nor do building sets, like some building block sets, that are marketed for persons 18 years and older.

Examples of items that are included:

• arts and crafts kits, bead kits, paint kits, crochet kits
• building blocks
• STEM assembly kits
• plasticine
• stacking cups and blocks
• alphabet sets
• jewellery making kits

Examples of items that are excluded:

• model sets such as train sets that are marketed for adults as they are not primarily designed for use by a child under 14 years of age
• building sets marketed for adults such as certain building block sets as they are not primarily designed for use by a child under 14 years of age
• materials and accessories acquired separately from the qualifying toy but used for qualifying toys such as paint and glue for model planes or craft sets

Other toys that are not zero-rated

An item might be a toy, toy set or toy system that is designed for use by a child under 14 years of age for learning or play purposes however the nature of the toy does not fall within subparagraphs 10(a)(iii) or (v). These products are not zero-rated during the eligible period.

Examples of these items include:

• yo-yos
• flying discs
• hula hoops

16. Which jigsaw puzzles qualify?

In accordance with paragraph 10(b) of Part XI of Schedule VI, all jigsaw puzzles qualify for zero-rated treatment during the eligible period. This includes jigsaw puzzles for all ages.

17. What are qualifying video game consoles, video game controllers and physical game media?

Video Game Consoles

In accordance with paragraph 10(c) of Part XI of Schedule VI, when a video game console is designed primarily for use in playing video games, it qualifies for zero-rated treatment. Other video game accessories such as gaming chairs, cockpits, or headsets do not qualify.

Where a gaming console, is sold as a single supply of a bundled package that includes the rights to a downloadable game, the entire bundled package is zero-rated. However, if a gaming console is sold and the purchaser can also acquire rights to a downloadable game as a separate supply, only the console itself is zero-rated.

VR (virtual reality) consoles that work independently and have a built-in battery alongside their own processor, and handheld consoles are considered video game consoles.

Video Game Controllers

In accordance with paragraph 10(d) of Part XI of Schedule VI, a video game controller qualifies where it is designed primarily for use in playing video games on a qualifying video game console. However, any accessories related to the controllers, such as skins, charging cables, or additional attachments do not qualify.

Video game controllers would include items such as dance mats and tennis rackets that are used to control the video games played on the video game console.

Video Games

In accordance with paragraph 10(e) of Part XI of Schedule VI, video games qualify when they are supplied in a physical tangible format (that is not a downloadable format) that is designed for the read-only storage of information in digital format and contains a video game designed for use with a qualifying video game console. Physical tangible format video games, such as those in CD formats or cartridges, qualify for zero-rating during the eligible period. Examples include games designed for consoles which often come in disc or cartridge forms. However, digital downloads do not qualify for zero-rating.

Christmas Trees or Similar Decorative Trees

18. What are Christmas trees or similar decorative trees?

Pursuant to section 9 of Part XI of Schedule VI, Christmas trees or similar decorative trees, whether natural or artificial, qualify for zero-rated treatment. Christmas trees and items sold or marketed as such during the holiday season are zero-rated.

Hanukkah bushes and trees qualify for zero-rated treatment.

Decorations for Christmas trees do not qualify. Other holiday related decorations that are not in the physical form of a tree (for example, Christmas tree themed decorations for a wall) also do not qualify. Items such as poinsettia plants, mistletoe and wreaths do not qualify.

Qualifying Food and Beverages

19. Which supplies of food and beverages qualify for zero-rated treatment during the eligible period?

The supply of basic groceries, which includes most supplies of food and beverages marketed for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages), is ordinarily zero-rated. Also, certain supplies of food and beverages are exempt for GST/HST purposes such as certain student meals, certain meals provided to seniors in their homes or certain supplies of unbottled water. However, certain categories of foodstuffs, for example, carbonated beverages, candies and confectionery, and snack foods are taxable. 

The taxable food and beverages that qualify for zero-rated treatment during the eligible period are:

• qualifying foods and non-alcoholic beverages (section 11 of Part XI of Schedule VI)
• eligible beverages (section 12 of Part XI of Schedule VI)
• qualifying services of providing, preparing and serving food, non-alcoholic beverages and eligible beverages (section 13 of Part XI of Schedule VI)

It should be noted that dietary supplements, as referred to in GST/HST Info Sheet GI-001, Products Commonly Described as Dietary Supplements, are not considered to be basic groceries and are not zero-rated during the eligible period.

All cannabis products that are food or beverages are not zero-rated during the eligible period.

19A. Which foods and non-alcoholic beverages qualify for zero-rated treatment during the eligible period?

A qualifying food or non-alcoholic beverage is a food or beverage for human consumption that is ordinarily taxable by application of any of paragraphs 1 (c) to (o.5) and (q) of Part III of Schedule VI.

Food and non-alcoholic beverages sold through a vending machine are not zero-rated.

19B. For businesses that sell energy bars, protein bars, ready-to-consume energy drinks, and/or ready-to-consume protein drinks, will these be subject to the zero-rated treatment during the eligible period?

The zero-rated treatment during the period applies to food and beverages for human consumption. Products that are considered to be dietary supplements are not food or beverages for human consumption for the purposes of the GST/HST. Dietary supplements therefore do not qualify for GST/HST relief during the eligible period.

Dietary supplements are consumed for their therapeutic or preventive effects or to achieve specific beneficial effects related to performance or physique. Dietary supplements are usually made with natural or synthetic ingredients and include products such as vitamins, minerals, tonics, fibre, protein, amino acids, fatty acids, enzymes, herbal supplements, or compounds derived from plant or animal products.

Examples of dietary supplements can include:

• vitamins and minerals, such as multivitamin products
• protein isolate powder
• energy shots or wellness shots
• detox and cleanse products
• fibre mixes and supplements
• herbal supplements

If a product has a Drug Identification Number (DIN), a Homeopathic Medicine Number (DIN-HM), or a Natural Product Number (NPN) in accordance with Health Canada requirements, it is a dietary supplement and not a food or beverage and therefore does not qualify for GST/HST relief during the eligible period.

The presence of any of the following factors is a strong indicator that a product in question is a dietary supplement and does not qualify for GST/HST relief during the eligible period:

• sold in tablet, pill, capsule or similar form
• sold in powdered or granulated form and consumed for its beneficial or therapeutic effects
• labelled as a dietary supplement or a supplement
• instructions for product consumption including timing, dosage and restrictions
• marketing claims that the product has a therapeutic or preventive effect, enhances mental or physical performance, or enhances physique
• emphasis on particular nutrients not commonly regarded by a consumer as an ingredient (such as whey protein isolate)
• claims that the product will promote weight loss
• warnings as to who should not consume the product (for example, the product should not be consumed, or should only be consumed in restricted amounts, by pregnant women or children under 16 years of age)
• the product is compared in its marketing to other products that are not considered to be food, beverage or ingredients.

For energy bars, protein bars and ready-to-consume energy or protein drinks (such as protein shakes), these products are considered to be food or beverages and qualify for GST/HST relief during the eligible period when the product:

• competes directly with other similar products that are not enhanced by protein, caffeine, vitamins, and/or minerals (for example, they may be sold in a similar aisle in a store and are marketed in a similar fashion)
• is consumed by the average person to assuage hunger or allay thirst
• is considered by Health Canada to be a food or beverage (including products that would come within Health Canada's new Supplemented Foods regulations)

If a product that is an energy bar, a protein bar, or ready-to-consume energy or protein drink does not meet the above criteria, it is likely a dietary supplement and would not qualify for GST/HST relief during the eligible period.  

19C. Which alcoholic beverages are eligible beverages?

An eligible beverage is defined in section 1 of Part XI of Schedule VI to mean a beverage that is

(a)    beer or malt liquor;

(b)    wine, or another beverage, that is produced without distillation, other than distillation to reduce the absolute ethyl alcohol content, by the alcoholic fermentation of a plant or product described by subparagraphs (a)(i) to (iii) of the definition wine in section 2 of the Excise Act, 2001;

(c)    sake;

(d)    a beverage described by subparagraph (b) or (c) that is fortified not in excess of 22.9% absolute ethyl alcohol by volume (ABV);

(e)    an alcoholic beverage that is packaged, as defined in section 2 of the Excise Act, 2001, and that does not contain more than 7% of absolute ethyl ABV at the time that it is packaged; or

(f)     an alcoholic beverage that is a mixture containing one or more of the beverages described in paragraphs (a) to (e) and not containing any other alcoholic beverage.

Wine, beer, sake and malt liquor (including de-alcoholized wine, beer or sake) are eligible beverages.

While beer is made from fermented grains and wine is made from fermented grapes, other alcoholic beverages are made from other fermented sources. For example, cider is made from fermented apples and mead is made from fermented honey. These other fermented alcoholic beverages are eligible beverages captured under paragraph 1(b) under the "another beverage" conditions.

Fortified fermented alcoholic beverages (other than beer and malt liquor) that are not in excess of 22.9% absolute ethyl ABV are an eligible beverage.

Any spirits or liqueurs that are packaged and contain 7% or less of absolute ethyl ABV at the time that they are packaged qualify as an eligible beverage. Typically, spirits and liqueurs do not fall into this category due to the higher alcohol content however de-alcoholized spirits and de-alcoholized liqueurs qualify.

Pre-mixed alcoholic beverages (for example, wine-based or spirit-based beverages) that contain 7% or less of absolute ethyl ABV at the time that they are packaged are an eligible beverage.

Based on the above, alcoholic beverages that are not eligible beverages are:

• spirits and liqueurs (other than de-alcoholized spirits and de-alcoholized liqueurs)
• pre-mixed alcoholic beverages that are packaged and contain more than 7% of absolute ethyl ABV
• fortified fermented alcoholic beverages that are in excess of 22.9% absolute ethyl ABV

In addition, a mixed drink from an establishment (such as a bar or a restaurant) is an eligible beverage if it includes an alcoholic beverage that is an eligible beverage unless the mixture contains one or more of the following beverages:

• spirits and liqueurs (other than de-alcoholized spirits and de-alcoholized liqueurs)
• pre-mixed alcoholic beverages that are packaged and contain more than 7% of absolute ethyl ABV
• fortified fermented alcoholic beverages that are in excess of 22.9% absolute ethyl ABV

For example, a drink that is a mixture of beer and cider (two eligible beverages) is zero-rated during the eligible period while a mixture of a spirit and soda is not zero-rated during the eligibility period.

19D. Which services of providing, preparing and serving food, non-alcoholic beverages and eligible beverages qualify?

A supply (other than an exempt supply) of the following services of providing, preparing and serving food, non-alcoholic beverages and eligible beverages (other than cannabis products) qualifies for zero-rated treatment during the eligible period:

• non-alcoholic beverages and eligible beverages dispensed at the place that they are sold
• food, non-alcoholic beverages and eligible beverages sold under a contract for, or in conjunction with, catering services
• food, non-alcoholic beverages and eligible beverages when sold at an establishment at which all or substantially all of the sales of food or beverages are taxable sales of food or beverages

19E. When will the zero-rating apply to qualifying services related to the provision of food or beverages?

In accordance with section 13 of Part XI of Schedule VI, a supply (other than an exempt supply) of a service of providing, preparing and serving food, non-alcoholic beverages or eligible beverages (other than food or beverages included in paragraph 1(b) of Part III, that is cannabis products) for human consumption, including a catering service, whether the food or beverages are for consumption at the premises where they are prepared or served or for consumption at another location are zero-rated during the eligible period if:

• all of the consideration for the supply is paid during the eligible period; and
• the service is rendered entirely during the eligible period.

19F. Do the various fees charged by establishments in connection with the provision of qualifying services related to the provision of food or beverages also qualify?

Catered Events

Qualifying services (such as catering) related to the provision of food or beverages are often provided as part of an event or function such as a wedding. It is important to note that the GST/HST relief only applies in respect of the provision, preparation and serving of food, non-alcoholic beverages or eligible beverages including a catering service. Such other services that may be provided along with a catering service but are not zero-rated during the eligible period include (but are not limited to):

• the right to attend the event
• facilities hosting services
• entertainment provided by musicians, disk jockeys or other entertainers

Food Delivery Services

The zero-rating provision in section 13 applies to the service of providing, preparing and serving food, non-alcoholic beverages or eligible beverages (Prepared Food).

The provision of delivery services for the delivery of Prepared Food does not itself qualify for zero-rating during the eligible period. However, when a restaurant using independent subcontractors or employees provides a delivery service for Prepared Food together with the provision of the Prepared Food, the restaurant is generally supplying a single supply of delivered Prepared Food. Accordingly, the zero-rating provision in section 13 would apply to the consideration for that single supply of delivered Prepared Food.

Based on what we have seen so far, restaurants using platforms for delivery services remain the supplier of the Prepared Food and the platform operator is the supplier of the delivery service to the consumer. Section 13 applies to the restaurant's supply of the Prepared Food and the delivery service is taxable. Receipts provided by platform operator to consumers often indicate the amount for the Prepared Food on behalf of the restaurant as well as the name of the restaurant on the receipt while the delivery fee with other platform fees are charged on the platform’s own behalf.

Tips/Gratuities

Any optional tip/gratuity paid by the recipient of the supply is not taxable under the ETA as it is not consideration for a supply. In cases where a mandatory tip/gratuity is applied as a service charge on a recipient's invoice, the tip/gratuity is considered as additional consideration for the supply.

During the eligible period, the GST/HST treatment of the mandatory tip/gratuity follows the same GST/HST treatment as applied to the underlying supply. To that extent, where a mandatory tip/gratuity applies in respect of a qualifying service, no GST/HST applies in respect of the mandatory tip/gratuity amount. However, if a mandatory tip/gratuity applies in respect of a non-qualifying service, the GST/HST also applies in respect of the mandatory tip/gratuity amount.

Other Fees

There may be other fees and charges involved in relation to the provision of food or beverages which would not qualify. These could include (but are not limited to):

• cancellation fees for not proceeding with a reservation
• any fees for the provision of utensils or containers used in the consumption of qualifying food or beverages

19G. What happens regarding supplies that include qualifying services and non-qualifying services?

If the conditions of section 13 are met, a supply made within the eligible period, of a service of providing, preparing and serving food, non-alcoholic beverages or eligible beverages (other than cannabis products) is zero-rated. Where an establishment supplies alcoholic beverages that are not eligible beverages (such as spirits), these supplies are not zero-rated.

In cases where qualifying and non-qualifying items are provided together but supplied as separate supplies, the supplier is required to charge the GST/HST on the non-qualifying supplies and apply the GST/HST relief to the supply of the qualifying services (that is the food, non-alcoholic beverages and eligible beverages).

19H. Is the supply of the provision of food and beverages at an establishment a single supply or two or more supplies?

Each transaction must be assessed on a case-by-case basis to make such a determination. In the past, it was usually not required to make such determinations for food and beverages provided by an establishment as all elements would attract the GST/HST whether supplied as a single supply or as two or more supplies. For addressing qualifying and non-qualifying services provided by an establishment during the eligible period, assistance is provided in GST/HST Policy Statement P-077R2, Single and Multiple Supplies.

In P-077R2, there are the following questions that assist in making such determinations:

• Is the property/service provided by two or more suppliers?
• Is there more than one recipient?
• What did the supplier provide for the consideration received?
• Is the recipient made aware of the elements (in detail) that are part of the package?
• In the context of the particular transaction, does the recipient have the option to acquire the elements separately or to substitute elements?

Based on these factors and the nature of the provision of food and beverages at establishments, during the eligible period, the CRA considers that the provision of each item ordered from an establishment is a separate supply to the extent that such individual items and the charges for those individual items are known to the customer before ordering (or could be so known if the customer asked) and the customer has the ability to order such items individually. In these cases, even though the customer might receive one invoice with individually itemized supplies, each supply retains its own individual GST/HST treatment. Qualifying services receive zero-rated treatment. Non-qualifying services remain subject to the GST/HST.

There may be other circumstances where a fee is set for the provision of food and beverages at an establishment and a customer is not allowed to order items separately or substitute such items. This may occur, for example, with a degustation at a restaurant or when an establishment hosts an event such as a wine/food tasting event, a concert, or a wedding. In these circumstances, the provision of the service may be a single supply.

In these circumstances, if these elements are supplied to a customer as a single supply during the eligible period, in accordance with P-077R2, the establishment will need to determine the nature of that supply.

Predominant Element of the Supply is the Provision of a Qualifying Service

If the predominant element of the supply is determined to be the provision, preparation and serving of food, non-alcoholic beverages or eligible beverages, then the supply will be zero-rated in accordance with section 13 even if there are other elements of the supply that may not be a qualifying good or qualifying service.

Predominant Element of the Supply is the Provision of a Non-Qualifying Service

There may be circumstances where the provision of food, non-alcoholic beverages and eligible beverages are only one element of a single supply. Non-qualifying services can include the provision of entrance to an event, and alcoholic beverages that are not eligible beverages.

If it is determined that an establishment makes a single supply and the predominant element of that supply is the provision of alcoholic beverages that are not eligible beverages or another non-qualifying service, then the entire supply would not be zero-rated during the eligible period even if some elements of the supply include the provision of qualifying services.

19I. If a chef supplies their services of preparing and serving food during the eligible period is the supply zero-rated?

In accordance with section 13 of Part XI of Schedule VI, a supply (other than an exempt supply) of a service of providing, preparing and serving food, non-alcoholic beverages or eligible beverages (other than food or beverages included in paragraph 1(b) of Part III, that is cannabis products) for human consumption, including a catering service, whether the food or beverages are for consumption at the premises where they are prepared or served or for consumption at another location are zero-rated during the eligible period if:

• all of the consideration for the supply is paid during the eligible period; and
• the service is rendered entirely during the eligible period.

For the supply to qualify, the chef must make a supply of a service providing, preparing and serving food. In these circumstances, if the chef does not supply the food, section 13 does not apply and the supply is not zero-rated. This may occur where the chef's customer already has the food and the chef is contracted to only prepare and serve the food. Similarly, a waiter that is hired to serve food and or eligible beverages does not qualify for zero-rated treatment.

19J. Are gift baskets zero-rated during the eligible period?

As set out in GST/HST Memoranda 4-3, Basic Groceries, when all or substantially all (that is 90% or more) of the value of the supply of a gift basket is zero-rated, the tax status of the supply is zero-rated. Conversely, when the value of the component parts, each of which is taxable (other than zero-rated goods), exceeds 10% of the total value of the supply, the supply is not zero-rated. For example, if the value of the taxable goods (other than zero-rated goods) in the gift basket (including the value of the decorative basket itself) exceeds 10% of the value of the total supply, the supply is subject to the GST/HST. Decorative baskets used in creating gift baskets are not considered to be usual coverings or containers for purposes of section 137.

During the eligible period, the rule will continue to apply. If all or substantially all (that is 90% or more) of the value of the supply of a gift basket is zero-rated, the tax status of the supply is zero-rated. The zero-rated category for the purposes of the calculation during the period includes qualifying goods such as food, non-alcoholic beverages and/or eligible beverages.

19K. Are wine kits and beer kits zero-rated during the eligible period?

There is no change in the application of the GST/HST during the eligible period. Wine-making kits containing the ingredients to make wine (grape juice concentrate, yeast, etc.) are zero-rated. Wine-making kits that include labels, corks and shrink capsules as well as ingredients are also zero-rated. Wine-making kits containing additional items such as apparatus, equipment or material used in the manufacture of wine are taxable. Beer-making kits containing only the ingredients to make beer (yeast, hops etc.) are zero-rated. Beer-making kits containing more than just ingredients to make beer such as kits that include equipment or apparatus required to manufacture beer are taxable. 

20. If a business uses the factor method for claiming ITCs during the fiscal year how will the zero-rated treatment applying to most supplies of food and beverages impact a business' choice to apply the factor method?

In accordance with GST/HST Policy Statement P-184 – Credit Card Expenses and the Registrant's Use of Factors For Claiming Input Tax Credits, the CRA allows a registrant who is an employer, partnership, charity or public institution to use factors to calculate ITCs in respect of the tax deemed paid by the registrant on purchases made by the registrant's employees, partnership members or volunteers where credit cards have been used to make purchases.

The use of factors is intended to simplify the administrative burden registrants have because credit card receipts are often a one sum total and include gratuities, PST, QST, etc. The use of a factor simplifies the process of claiming ITCs for a registrant on these types of business expenses. This is an administrative policy of the CRA and is not legislated. The choice of the factor method is an option for a registrant. Some registrants may prefer to use the exact calculation method.

The CRA will permit registrants to use factors for calculating ITCs on expenses charged to company credit cards, provided that certain conditions are satisfied.

One such condition is that the purchases of property or services recorded on the credit card statement must be all or substantially all (90% or more) taxable supplies (other than zero-rated supplies) acquired in Canada by the card member.

In accordance with GST/HST Memorandum 9-4 - Reimbursements, the method of calculation selected by a registrant must be used consistently within each category of reimbursed amounts (for example, airfare, hotel accommodation, food, beverages and entertainment) throughout the fiscal year.

Therefore, if the registrant chooses to calculate the tax paid in respect of airfare expenses for one employee based on a factor of deemed tax paid, the registrant must use the same method for such expenses reimbursed to all other employees during the fiscal year.

When the above conditions apply and a registrant chose to apply the factor method in respect of the employee's acquisition of meals, this could be impacted due to the GST/HST relief as prepared meals are zero-rated during the eligible period.

However, administratively, the conditions for using the factor method will not be impacted by the acquisitions made during the eligible period. In that regard, if the requirement that purchases of property or services recorded on the credit card statement be all or substantially all (90% or more) taxable supplies (other than zero-rated supplies) acquired in Canada is not met (dips below 90%) due to the zero-rated treatment for prepared meals during the eligible period, this will not impact the registrant’s ability to use the factor method. Furthermore, registrants will not be required to use the same method for such expenses reimbursed to all other employees during the fiscal year if they wish to change their use of the factor method during the eligible period due to the tax treatment changes.

21. Does the GST/HST tax relief also apply to the First Nations goods and services tax (FNGST)?

Yes. From December 14, 2024 to February 15, 2025, no FNGST will be charged on items that qualify for the GST/HST tax relief as long as it is both paid in full and delivered or made available to the buyer during this period. These supplies are zero-rated for FNGST purposes.

For more information on the FNGST and the list of the First Nations that impose the FNGST, go to First Nations Goods and Services Tax.

21A. Will the GST/HST tax relief also apply to the First Nations tax (FNT)?

Yes. From December 14, 2024 to February 15, 2025, no FNT will be charged on eligible alcoholic beverages that qualify for the GST/HST tax relief as long as it is both paid in full and delivered or made available to the buyer during this period. These supplies are zero-rated for FNT purposes. The FNT will still be charged on alcoholic beverages that do not qualify for the GST/HST tax relief (for example, spirits and liqueurs).

For more information on the FNT and the list of the First Nations that impose the FNT, go to First Nations tax.

21B. If a supplier did not charge the FNGST or FNT on qualifying items from December 14, 2024 to February 15, 2025, can they still claim ITCs related to those qualifying items?

Yes. GST/HST registrants can claim an ITC for the GST/HST, FNGST or FNT paid or payable on expenses incurred to make supplies of qualifying items.

21C. Does the GST/HST tax relief apply on reserves where there is no FNGST or FNT?

Yes. From December 14, 2024 to February 15, 2025, no GST/HST will be charged on qualifying items sold on a reserve where there is no FNGST or FNT, as long as it is both paid in full and delivered or made available to the buyer during this period.

On a reserve where the FNGST or the FNT does not apply, no GST/HST will be charged on qualifying items sold or delivered on a reserve to an individual registered under the Indian Act, an Indian band or a band-empowered entity provided they qualify for the relief of the GST/HST described in Technical Information Bulletin B-039, GST/HST Administrative Policy - Application of the GST/HST to Indians. That is, an individual registered under the Indian Act, an Indian band or a band-empowered entity continue to be entitled to the GST/HST relief when the requirements described in TIB B-039 are met. For more information, go to GST/HST and First Nations peoples.

22. Will CRA apply audit discretion in circumstances where a business has made a concerted effort to meet its tax obligations during the eligible period however may have incorrectly treated some supplies as zero-rated and the recipient is entitled to full ITCs?

The CRA will take a practical approach to compliance. The CRA will dedicate its efforts towards situations in which businesses willfully and egregiously refuse to comply with the temporary measures, such as those who collect the GST/HST but do not remit it to the CRA. Businesses who make reasonable efforts to comply with the legislation will not be the focus of our compliance actions.

Further information