GST/HST Tax Break: A Guide for Business Owners
The Canadian Government’s Tax Break for All Canadians Act was intended to provide economic relief during the holiday season, by issuing a one-time break from GST/HST from December 14, 2024, to February 15, 2025. However, because of the short implementation period many businesses are left confused while navigating the complexities of this temporary tax break and are worried about what the effects of any inadvertent non-compliance will be. Knowing the finer details of the tax break and what dispute resolution options are available to taxpayers can help ease those concerns when filing your upcoming GST/HST returns.
How Does The GST/HST Tax Break Work?
The Tax Break for All Canadians Act amends the Excise Tax Act by designating certain taxable supplies as zero-rated supplies. This zero-rating means that while these goods and services are still taxable, and therefore eligible for Input Tax Credit deductions, the tax rate is 0%. As such, GST/HST registrants are not required to charge or remit any tax on these items.
This zero-rating only applies to supplies that are fully received by the purchaser within the December 14 to February 15 window and are paid for during that window as well. This means that GST/HST must be charged and remitted for any eligible supplies bought on credit where payment will take place after the end of the period. Likewise, any pre-purchased items must be delivered before the end of the period, otherwise they are not covered by the tax break.
What Does the Tax Break Cover?
A wide variety of supplies are covered by the tax break, including:
- Prepared food such as restaurant meals,
- certain alcoholic beverages like beer and wine,
- items for children such as clothing, toys, diapers, and car seats,
- video game consoles and controllers.
- physical books or newspapers, and
- certain holiday decorations like Christmas trees or Hannukah bushes.
Part of the reason businesses are facing so much confusion regarding the tax break is that it is not always simple whether their particular product falls into these categories. For example, when a restaurant charges a delivery fee, that fee is zero-rated if the meal is zero-rated. However, fees for third party delivery platforms like Uber-Eats are not. Decorations for a Christmas tree are not zero-rated, but any decoration in the shape of a Christmas tree is, regardless of how big or small it is. Mixed beverages are zero-rated only if each of their components are zero rated, which means adding a single drop of an alcoholic spirit to an otherwise zero-rated pitcher of sangria makes the entire drink no longer eligible for the tax break.
What to Do if You Charged GST/HST in Error?
The Canada Revenue Agency (CRA) has stated that they will be focusing their attention on businesses who willfully and egregiously refuse to comply with the HST Holiday requirements, with one provided example being any business that collects the GST/HST and does not remit it.
However, the CRA has also advised consumers that they should request a refund from any business that charges them GST/HST in error. What this means is that the business is expected to remit the wrongly charged GST/HST to the CRA, but provide a refund to the customer upon request, and then later amend their GST/HST return to receive a credit for the wrongly charged and remitted GST/HST.
Businesses chosen for an audit review by the CRA for their GST/HST trust account should expect to produce all available documentation for review by the auditor. The CRA will make adverse assumptions of fact will be made where no documentation is available. If reassessed, a business can file a Notice of Objection within 90 days, but this will not halt the CRA’s attempts to collect the alleged debt.
If a business believes they have made an error with their filed and remitted GST/HST, they may be eligible for the Voluntary Disclosure Program. Filing under this program may avoid the application of penalties, but to be eligible the disclosure must voluntary and completely unprompted, complete and accurate, involve a potential penalty, be made at least one year past the filing deadline, and include payment for any related taxes owing.
Businesses can also apply for Taxpayer Relief to ask that any penalties and interest are waived. The CRA has the discretion when to grant this, but it is generally granted where the penalties and interest arise for reasons beyond the taxpayer’s control.
Conclusion
The GST/HST holiday has left many businesses confused as they attempt to implement these temporary changes. As their GST/HST return filing dates approach, many are left wondering regarding the precise tax treatment for their products, and if they will be facing extra scrutiny from the CRA.
If you find yourself confused about the details of the GST/HST Holiday tax break or in a compliance dispute with the CRA, it’s crucial to seek professional assistance. Scheduling a consult with our experienced team at Rosen & Associates Tax Law can help you understand the finer points of the tax break, how the law affects your tax obligations, and help guide any disputes with the CRA to the best possible outcome.
***Disclaimer: This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions, you should consult a lawyer.
Michelle Kosarnia
