How a GST Elimination on New Homes Could Affect the Existing Housing Rebate Framework
In wake of the recent federal election, Prime Minister Carney’s platform placed a greater focus on eliminating the Goods and Services Tax (GST) for first-time homebuyers on homes at or under $1 million. While opinions differ on the policy’s fruition and potential to increase housing supply, this article aims to explore its practical considerations, specifically how this policy would affect the existing GST/HST New Housing Rebate program.
To assess this, it is helpful to first understand the current rebate structure, using the 2025 Tax Court of Canada decision in Ram v The King 2025 TCC 49 (“Ram”).
Current GST/HST Rebate System: An Overview
Under existing legislation, two separate housing rebate programs exist: a federal GST rebate and a provincial component, which varies by jurisdiction.
In Ram, the Appellant purchased a newly built home from a builder at a base price of $287,889.31, excluding taxes. At the federal level, newly constructed homes are subject to a 5% GST, however, buyers may claim a rebate of up to 36% of the federal GST if certain eligibility criteria are met—most notably, that the home is intended for use as a primary residence and the purchase price falls below a designated threshold.
Since the price of the home in question was under $350,000, the Appellant qualified for the full 36% federal rebate, resulting in a refund of $5,182.31. In other words, the rebate was calculated as 36% of the 5% federal tax component.
Hypothetical Impact of a Full Federal GST Exemption
If a newly elected government were to fully eliminate the federal GST on new homes, as proposed, a home purchased under similar circumstances would benefit from an outright tax savings of approximately $14,394.46. This is significantly higher savings than the amount currently offered under the current Rebate Program
In provinces like Ontario that participate in the Harmonized Sales Tax (HST) system, the total tax on new homes is a combination of federal and provincial portions—5% and 8%, respectively, for a total of 13%.
Ontario’s housing rebate is notably more generous than the federal equivalent, allowing a rebate of up to 75% on the provincial component. In Ram, this amounted to $17,273.36. When combined with the federal rebate, the total recovery stood at $22,455.67, offsetting approximately 60% of the total HST bill of $37,425.61.
Legal Outcome and Rebate Denial
Despite meeting the numerical thresholds, the Appellant’s claim was ultimately denied. The Canada Revenue Agency concluded that the property had not been acquired as a primary residence but instead appeared to be part of a speculative transaction consistent with house flipping.
The appellant’s central argument in the appeal was that, since the home was purchased jointly with another individual in a 50/50 partnership, they should be responsible for only half of the rebate amount. Since initiating the appeal, the appellant has consistently described her arrangement with Mr. Kumar as a 50/50 partnership. The Court emphasized that that as per section 123(1) Excise Tax Act (“ETA”), a partnership is considered a single “person”. Thus, the members of a partnership are jointly and severally liable for all amounts payable by the partnership.
Additionally, the Appellant also failed to provide sufficient documentation, such as a statement of adjustments from the subsequent sale of the property. As a result, the Court held the Appellant liable for the rebate and ruled that the amount must be repaid in full.
Key Takeaways and Future Considerations
This case highlights that eligibility for the New Housing Rebate depends not only on the purchase price and rebate calculations but also on factors such as the intended use of the property as a primary residence and the provision of adequate supporting documentation. Even if additional federal GST exemptions are introduced, strict eligibility criteria will likely remain to prevent abuse by speculative buyers. Furthermore, the provincial portion of the HST rebate continues unless provinces amend their programs individually. Until legislative changes occur, both purchasers and builders must strictly comply with all current eligibility requirements under the law to qualify for the rebate.
If you are unsure about your eligibility or the implications of your purchase or business activity, it is wise to consult a tax professional to ensure compliance.
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.
Bhavika Chadha
