GST AND HST RULES - SIMPLE VIDEO EXPLANATION - PART 2
How does GST and HST work in Canada? Here's part II of our video series on GST/HST.
This second video discusses a few more GST and HST scenarios that Canadian businesses may encounter on a daily basis. This video will discuss zero-rated goods and services, exempt goods and services and how GST and HST work when a business is faced with sales to other provinces.
Exempt and Zero-Rated GST and HST
Zero-Rated GST and HST goods: Businesses can claim Input Tax Credits (ITC's) on business expenses but don't charge GST or HST on sales. Some examples are: Prescriptions (Pharmacies), medical devices and groceries (grocery store businesses).
Exempt GST and HST goods: Business cannot claim ITC's on business expenses and cannot charge GST or HST on sales. Some examples are: Music lesson businesses, education (tutoring), daycare services and medical professionals (chiropractors, physiotherapists, etc.)
Out of Province Sales of Goods and/or Services
This topic can get complex since there are many scenarios and variables that exist. Please check with an accounting professional before proceeding. In summary, if a harmonized province (Ontario) is selling goods/services to another harmonized province (Nova Scotia), then you would charge HST equivalent to the rate that exists in the province you are selling to. In this example, an Ontario customer would charge a Nova Scotia customer 15% on their sales invoice, which is the HST rate in Nova Scotia.
On the other hand, if a harmonized province (Ontario) is selling goods/services to a non-harmonized province (Alberta), then you would charge the government portion of sales tax (GST) that exists in the province you are selling to. In this example, an Ontario customer would charge an Alberta customer 5% on their sales invoice, which is the GST rate in Alberta.
For GST and HST Rates by Province, click here
Every situation can bring different implications that are not covered here and it is important to contact a professional if you are unsure about your GST/HST situation or if you would like to feel more comfortable having a professional look over you GST and HST circumstances.