Excise Tax Act (GST/HST)

The Excise Tax Act imposes the Goods and Services Tax (GST) and Harmonized Sales Tax (HST) in Canada. The GST is a 5% federal value-added tax on most goods and services supplied in Canada. In provinces that have harmonized their provincial sales tax with the GST (Ontario, New Brunswick, Nova Scotia, Newfoundland and Labrador, Prince Edward Island), the HST combines the federal and provincial components into a single tax. The Act provides for input tax credits allowing registered businesses to recover GST/HST paid on business inputs, ensuring the tax is ultimately borne by consumers. The Act exempts certain supplies (health care, education, childcare, financial services) and zero-rates others (exports, basic groceries, prescription drugs).

Legal area: Tax law establishes the legal framework for the imposition and collection of federal taxes, including income tax and consumption taxes.

Year enacted: 1985

Full text: https://laws-lois.justice.gc.ca/eng/acts/E-15/

Key Provisions

• Section 165: Imposition of GST (5% on taxable supplies)
• Section 123: Definitions (taxable supply, consideration, registrant)
• Part IX: Input tax credits (recovery of GST paid on inputs)
• Schedule V: Exempt supplies (health, education, childcare, financial services)
• Schedule VI: Zero-rated supplies (groceries, drugs, exports)
• Section 238: Penalties and interest
• Section 296: Offences and punishment (tax evasion)
• Part VIII: HST rates and administration for participating provinces

Significance

The Excise Tax Act is a major revenue statute, generating over $40 billion annually. The GST/HST credit (delivered through the income tax system) offsets the regressive impact of the tax for lower-income Canadians. The GST/HST framework interacts with Quebec’s separate provincial sales tax (QST) administered by Revenu Quebec. The Act’s zero-rating of basic groceries and prescription drugs reflects social policy objectives.