Goods and Services Tax/Harmonized Sales Tax (GST/HST)

Goods and Services Tax/Harmonized Sales Tax (GST/HST) is the tax imposed under Part IX of Canada's Excise Tax Act. GST is the federal tax on most taxable supplies in Canada. HST applies the same taxable base in provinces that have harmonized their provincial sales tax with the GST. Treasury Board guidance sets out this structure in its description of the tax.

The tax applies to taxable supplies of real property, goods, intangible personal property and services made in Canada. The recipient pays GST/HST to a GST/HST-registered supplier, and the supplier remits it to the Canada Revenue Agency (CRA), as explained in the CanadaBuys guidance on taxes and duties. Government contracts follow the same basic mechanics as private-sector sales, with some added contract and documentation requirements.

How GST/HST applies to federal government contracts

A supplier must generally charge GST/HST on taxable supplies of property and services made to the federal government. The CRA sets out this rule in its guidance on governments and diplomats.

Federal contract documents may include a clause permitting Canada to pay GST/HST. Contract costs used for approval purposes include the applicable GST/HST, according to the Treasury Board policy instrument on contracting. Treasury Board guidance also states that procurement contracts for goods, services and construction services, including the acquisition of real property, are subject to applicable taxes.

Provincial and territorial buyers and point-of-purchase relief

Treatment differs when the buyer is a provincial or territorial government. Some governments use a pay-and-rebate model, where the supplier charges the tax and the government recovers it afterwards. Others receive point-of-purchase relief, either through an exemption certificate or through a certification clause in the contract. The CRA describes these arrangements in its publication on provincial governments.

When a supplier does not charge GST/HST because a provincial or territorial entity qualifies for point-of-purchase relief, the supplier must keep evidence of that relief. Acceptable evidence includes the exemption certificate or the contract certification clause.

Invoicing and registration duties

A supplier must register for GST/HST where required, collect the applicable tax and remit it to the CRA. Under the federal general terms and conditions for medium to high complexity goods and services contracts, applicable taxes must be shown separately on invoices, together with the corresponding tax-authority registration numbers.

Bid teams should build these requirements into their pricing and invoicing templates before contract award.

GST/HST and NATO procurement

NATO procurement uses the comparable term value-added tax (VAT). NATO's procurement policy states that NATO common funds are not used to cover VAT and other taxes where applicable international agreements provide tax exemption. A Canadian supplier selling to a NATO entity should therefore check how the contract treats tax before setting its price.

What it means for a supplier bidding on Canadian public contracts

• Confirm whether you must be registered for GST/HST and include your registration number on invoices.
• Check whether the solicitation asks for prices with or without GST/HST, and show the tax separately on invoices.
• For federal contracts, look for the clause that lets Canada pay GST/HST.
• For provincial or territorial buyers, find out whether the buyer uses pay-and-rebate or point-of-purchase relief, and keep the exemption certificate or certification clause on file.
• For NATO opportunities, read the tax provisions in the contract terms before pricing.