GST/HST Exempt Items Canada

Complete guide to GST/HST-free and zero-rated goods and services in Canada. Understand the difference and what matters for your business.

0%

Zero Rate

5%

Reduced Rate

Exempt

No GST/HST

5%

Standard

GST/HST Exempt vs Zero-Rated: What's the Difference?

Zero-Rated (0%)

Customer Pays

0% GST/HST

Supplier Can Reclaim GST/HST

Yes, input GST/HST is reclaimable

Examples

Food, children's clothing, books, medicines

For Business: Zero-rated is better – you get full input GST/HST relief while charging 0% to customers.

GST/HST Exempt

Customer Pays

No GST/HST (0%)

Supplier Can Reclaim GST/HST

No, input GST/HST cannot be reclaimed

Examples

Insurance, finance, education, health

For Business: Exempt items cost more to supply because input GST/HST is a cost, not recoverable.

Key Point: Customer pays the same (nothing) in both cases, but the business impact is very different. This is critical for GST/HST planning.

Zero-Rated Items (0% GST/HST)

Food & Drink

  • • Fresh fruit and vegetables
  • • Meat and fish (uncooked)
  • • Bread and cereals
  • • Milk and dairy products
  • • Eggs
  • • Non-alcoholic beverages
  • Excluded: Hot/takeaway food, catering, confectionery

Children's Clothing

  • • Shoes and boots (under 6.5 to size 5.5/6)
  • • Clothing items sized for children
  • • Growth pads for shoes
  • • Clothing for average child height/weight
  • Excluded: Adult clothing, costumes, school uniforms

Books & Publications

  • • Books and booklets
  • • Newspapers and periodicals
  • • Maps and globes (for educational use)
  • • Religious materials
  • Excluded: Advertising material, e-books, magazines with ads

Public Transport

  • • Bus and coach services
  • • Train and tram services
  • • Underground rail
  • • Passenger ferries
  • Excluded: Luxury/private transport, parking

Prescription Medicines

  • • Prescription drugs and medicines
  • • Medical equipment on prescription
  • • Oxygen and respirators
  • Excluded: OTC medicines (standard rated), supplements

Water & Sewerage

  • • Domestic water supply
  • • Domestic sewerage services
  • • Waste water treatment
  • Excluded: Non-domestic water, industrial use

Reduced Rate Items (5% GST/HST)

Domestic Fuel & Power

  • • Electricity (domestic)
  • • Gas (domestic)
  • • Solid fuels for heating
  • • Oil heating

Safety & Child Seats

  • • Child car seats and booster seats
  • • Installation of child seats

Smoking Cessation

  • • Nicotine patches and gum
  • • Prescription smoking cessation products

Energy-Saving Materials

  • • Insulation materials
  • • Energy-saving windows
  • • Installation of energy-saving items

GST/HST Exempt Items (No GST/HST, No Input Recovery)

Insurance & Pensions

  • • Life insurance
  • • Car, home, travel insurance
  • • Pet insurance
  • • Pension advice and administration
  • Brokers' commissions are also exempt

Finance & Banking

  • • Loans and credit provision
  • • Interest and transaction fees
  • • Money transfers and exchanges
  • • Payment card services

Education & Training

  • • School and university tuition
  • • Vocational training by approved providers
  • • Exam fees (certain types)
  • Note: Corporate training is often standard rated

Health Services

  • • Medical treatment and services
  • • Dental and optical services (some)
  • • Health clinic services
  • • Physiotherapy (by registered providers)

Burial & Cremation

  • • Funeral services
  • • Burial plots and maintenance
  • • Cremation services
  • • Gravestones and memorials (supplies)

Postal & Property Services

  • • Royal Mail letter post
  • • Leasing/renting of property (mostly)
  • • Agricultural land rental

Standard Rate (5% GST/HST)

If something is not zero-rated, reduced-rated, or exempt – it's standard rated at 5%.

Common 5% Items

  • • Most food (hot/takeaway, confectionery)
  • • Alcohol and tobacco
  • • Adult clothing and footwear
  • • Electronics and appliances
  • • Furniture and household goods
  • • Construction and repairs
  • • Professional services
  • • Restaurants and takeaways

Services in 5% Category

  • • Hairdressing and beauty
  • • Repairs (goods and property)
  • • Delivery and shipping
  • • Accommodation (hotels, B&B)
  • • Entertainment and entry fees
  • • Car rental
  • • Pet services
  • • Most professional services

Why It Matters for Your Business

Input GST/HST Reclaim

If you sell zero-rated items, you can still reclaim input GST/HST on costs. This improves cash flow.

Example: Bookstore buys stock (zero-rated) and can reclaim input GST/HST even though they sell at 0%.

Cost Impact

Exempt services cannot reclaim input GST/HST, so costs are higher. This affects pricing strategy.

Example: Insurance broker bears the cost of GST/HST on their office rent and cannot reclaim it.

GST/HST Return Impact

Zero-rated income with GST/HST input reclaim = GST/HST refund. Exempt income = no refund opportunity.

Result: Businesses selling zero-rated goods often receive GST/HST refunds.

Mixed Sales

Businesses selling both standard and exempt items need to apportion input GST/HST.

Complexity: Proper accounting and GST/HST apportionment is essential.

Frequently Asked Questions

It depends on whether it's confectionery. Chocolate cakes are confectionery (5%), while plain cakes are zero-rated. Catering (cakes decorated to order) is standard rated. The presentation and decoration matter.

You cannot reclaim input GST/HST on exempt supplies. That's the rule. However, input GST/HST on costs directly related to standard-rated supplies can still be reclaimed (use apportionment if mixed).

The customer pays the same (0% or the regular price without GST/HST added). Business-to-business exempt supplies don't require a Business Number (BN) to be verified – they're automatically exempt. Consumer customers simply pay the base price.

Yes. Imports of zero-rated items (like food) are zero-rated. Imports from outside Canada may be subject to import GST/HST. Check the tariff code and supplier location.

Check CRA's GST/HST Notice 700/1 (The GST/HST Guide). Use the GST/HST product finder tool on CRA website. When in doubt, ask a tax advisor. The distinction is important for your GST/HST return.

Need GST/HST Help for Your Business?

Use our calculators and guides to understand your GST/HST obligations.

Reverse GST Calculator Canadian GST/HST Rates

Related Tools & Resources

Explore more GST/HST tools:

Canadian GST/HST Rates Reverse GST Calculator GST/HST Calculator Small Business GST Guide Import GST Calculator

Official tax resources:

CRA – Canada Revenue Agency CRA – GST/HST for Business