Goods and Services Tax (GST)

The Goods and Services Tax (GST) is a federal tax paid on most goods and services sold or provided in Canada. It is imposed under Part IX of the Excise Tax Act, and it applies to taxable supplies made in Canada. The Canada Revenue Agency sets out the core definitions in its GST/HST definitions page.

The Government of Canada introduced the GST on January 1, 1991, as a consumption tax payable by the purchaser. The Treasury Board of Canada Secretariat describes it in the same terms in its policy documentation. For suppliers, the practical point is that the tax is charged on top of the price of a taxable supply, collected from the buyer, and remitted to the government.

GST, HST and the term GST/HST

In certain provinces, the provincial sales tax is combined with the federal GST to form the Harmonized Sales Tax (HST). The combined tax is a single tax administered federally. Because of this, tax guidance and procurement documents usually refer to GST/HST, meaning the federal GST and, where it applies, the harmonized provincial-federal tax. The Treasury Board documentation confirms that the HST combines provincial sales tax with the federal GST.

Taxable, zero-rated and exempt supplies

Whether GST/HST applies depends on how a supply is classified. Three classifications matter to anyone preparing a price:

• Taxable supply: a supply that is subject to GST/HST.
• Zero-rated supply: a supply that is taxable at a rate of zero per cent, so no tax is charged on it.
• Exempt supply: a supply that is not subject to GST/HST.

A related concept is the supply made in Canada, which is a supply whose place-of-supply rules make it taxable in Canada. The CRA publishes general information for GST/HST registrants that explains how registrants apply these categories.

How GST/HST is treated in federal solicitations

In federal procurement, GST/HST is addressed in the "Taxes and duties" guidance of the Public Services and Procurement Canada CanadaBuys Buyer’s Guide. The rules cover federal procurement of real property, tangible property, intangible personal property and services supplied in Canada.

• Canadian-based offerors must include applicable customs duties and excise taxes in their prices unless the solicitation states otherwise.
• Canadian-based offerors must show GST/HST separately and identify whether each item is fully taxable, zero-rated or exempt.
• For the resulting contract, applicable GST/HST is included in the total estimated price where the solicitation requires it.
• Foreign-based offerors normally exclude Canadian customs duties, excise taxes and GST/HST from offer prices and from the contract’s total estimated price.

When GST/HST is payable and who remits it

For taxable supplies made in Canada, the federal client pays GST/HST to a supplier that is registered for GST/HST. The supplier is then responsible for remitting the tax to the Canada Revenue Agency. The CanadaBuys guidance also sets out the timing and the base for the tax:

• GST/HST is payable on the invoiced amount, before a discount for prompt payment or a late-payment penalty.
• GST/HST becomes payable when a progress payment, milestone payment or advance payment becomes due, or when the client pays it.

What GST/HST means for a supplier bidding on Canadian public contracts

A bid team should treat GST/HST as a defined part of the price, not an afterthought. If the supplier is Canadian-based, the offer must show GST/HST as a separate line and label each item as fully taxable, zero-rated or exempt. A supplier that is registered for GST/HST collects the tax from the federal client and remits it to the CRA, so the tax is not part of the supplier’s own revenue. A foreign-based supplier normally leaves Canadian customs duties, excise taxes and GST/HST out of its offer price. In every case, read the solicitation first, because the rules apply unless the solicitation states otherwise.