On November 21, 2024, the federal government announced a proposal for a temporary GST/HST vacation on certain products. The aim is to reduce Canadians’ bills for two months this winter. But it won’t reduce the workload of merchants, retailers and restaurateurs.
GST-HST leave
The announcement provides for a two-month GST/HST vacation from December 14, 2024 to February 15, 2025.
The measure also provides for the temporary elimination of GST/HST on imports of the same eligible products during the same period.
Eligible goods
The following is a summary list of eligible assets covered by the measure:
- Certain children’s clothing and footwear, car seats and diapers;
- Certain newspapers and printed books ;
- Christmas trees or similar decorative trees, natural or artificial;
- Certain foods and beverages, including :
- Alcoholic beverages, excluding spirits, such as wine, beer, cider and spirit-based blends with an alcohol content of 7% or less;
- Soft drinks, fruit juice drinks, candy, chips, chocolate, cakes and desserts;
- Prepared foods, such as trays of vegetables, cheese, cold cuts, fruit, prepared salads and sandwiches;
- Meals consumed in most catering establishments, in the dining room or takeaway;
- Food and beverages sold as part of a catering service
- Certain toys intended for children under the age of 14;
- Puzzles for all ages;
- Video game consoles, controllers or physical game media.
In concrete terms for companies
While this measure promises to be positive for businesses and households alike, it comes with a number of complexities of application, including:
- Certain categories of eligible products include numerous exceptions. In such a context, we can anticipate difficulties for companies in complying with the changes required to qualify the goods they market;
- Companies will have to change the configuration of their billing systems in a short space of time. This change has to be made during a period that promises to be already busy, and then have to be undone two months later;
- GST/HST-registered buyers who are entitled to claim these taxes on their expenses as input tax credits (“ITCs”) will need to pay particular attention to the processing of their supplier invoices to avoid claiming GST/HST in error. Extra vigilance will be required with regard to automated accounting systems that automatically determine recoverable taxes on expenses! The processing of expense reimbursements to employees will be part of the checklist that companies will need to attend to, in order to claim the correct amount of recoverable taxes on expenses incurred during these two months.
This temporary measure will bring major challenges for all Canadian businesses at only three weeks’ notice. If you have specific needs regarding the implementation of this measure, please do not hesitate to contact our commodity tax team.
An article from our consumption tax team
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