Not all small business sales are subject to GST/HST. In Canada, certain products and services are exempt from the tax, meaning you don't charge it to customers and don't claim input tax credits on related expenses. The main exempt categories include basic groceries, prescription drugs, medical devices, residential rent, and financial services like insurance and banking. If your small business sells only exempt goods or services, you may not need to register for GST/HST at all, even if your revenue exceeds the registration threshold. Understanding which sales are exempt is critical because it directly affects your registration decision, pricing strategy, and compliance obligations. Let's break down the key exemptions and how they apply to your small business. The CRA recognizes two broad categories of exempt supplies: Most basic food items are exempt from GST/HST, including: - Bread, milk, eggs, and vegetables - Meat, poultry, and fish (uncooked) - Fruits and nuts in their natural state - Coffee beans and tea leaves (unprocessed) However, prepared foods, restaurant meals, candy, soft drinks, and alcohol are not exempt and remain taxable. If you run a grocery store, bakery, or food wholesaler, understanding this distinction is essential for correct pricing and remittance.
No. Certain supplies are exempt from GST/HST, including basic groceries, prescription drugs, residential rent, and financial services. If you only sell exempt items, you don't charge tax even if your revenue exceeds the registration threshold.
You cannot claim input tax credits on expenses directly related to exempt supplies. However, if you have mixed sales (both taxable and exempt), you can claim credits on shared expenses allocated to taxable supplies using a reasonable method like revenue ratio.
No, this CRA rule may apply to you: you are not required to register if all your supplies are exempt, regardless of revenue. However, you may choose to register voluntarily if you want to claim input tax credits on business expenses.
No. While basic groceries like bread and vegetables are exempt, prepared and cooked foods, restaurant meals, and takeout are fully taxable at the regular GST/HST rate.
The CRA publishes detailed exemption lists on its website and offers a Technical Interpretation Service for specific questions. If you're unsure, contact the CRA directly or consult a tax professional to confirm your supply category.