The Excise Tax Act (Canada) (“ETA”) is made up of Parts I through IX and Schedules I through X. The legislation for the Goods and Services Tax (GST) and Harmonized Sales Tax (HST) is found in Part IX, from sections 122 to 363.2, and Schedules V to X of the ETA.
Section 123(1) contains definitions of many key terms.
Subsection 165(1) is the basic GST/HST charging provision which requires every recipient of a taxable supply made in Canada to pay tax to Canada (federally) in respect of the supply at 5% on the value of the consideration for the supply.
Subsection 165(2) similarly requires every recipient of a taxable supply made in a participating province to pay tax to Canada (federally) in respect of the supply at the tax rate for that province on the value of the consideration for the supply. The five participating provinces are Ontario, Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland and Labrador. The provincial “tax rate” is 8% for Ontario and 10% for the four Atlantic provinces. [Subsection 123(1) “participating province”, “tax rate” and Schedule VIII] In Ontario, the combined HST rate is 13%.
Subsection 165(3) provides that the tax rate in respect of a taxable supply that is a zero-rated supply is 0%. This rate overrides the rates in subsections 165(1) and (2).
“Taxable supply” means a supply that is made in the course of a commercial activity.
“Supply” means the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, rental, lease, gift, or disposition.
“Commercial activity” of a person means (a) a business carried on by the person (other than a business carried on without a reasonable expectation of profit), except to the extent to which the business involves the making of exempt supplies by the person, (b) an adventure or concern in the nature of trade, and (c) the making of a supply (other than an exempt supply) by the person of real property of the person, including anything done by the person in the course of or in connection with the making of the supply.
“Exempt supply” means a supply included in Schedule V.
Schedule V contains: Part I – Real Property; Part II – Health Care Services; Part III – Education Services; Part IV – Child and Personal Care Services; Part V – Legal Aid Services; Part V.1 – Supplies by Charities; Part VI – Public Sector Bodies; Part VII – Financial Services; and Part VIII – Ferry, Road and Bridge Tolls.
“Zero-rated supply” means a supply included in Schedule VI.
Schedule VI contains: Part I – Prescription Drugs and Biologicals; Part II – Medical and Assistive Devices; Part II.1 – Other Products (feminine hygiene products); Part III – Basic Groceries; Part IV – Agriculture and Fishing; Part V – Exports; Part VI – Travel Services; Part VII – Transportation Services; Part VIII – International Organizations; Part IX – Financial Services; and Part X – Collection of Customs Duties.