Why "0%" is Better Than "None"
In the world of GST/HST, not all tax-free items are created equal.
1. Zero-Rated Supplies (0% Tax)
The government wants to keep these items affordable but allows businesses to stay profitable.
- Examples: Basic groceries (milk, bread, vegetables), prescription drugs, and exports.
- Benefit: You charge $0 tax, but you can still claim ITCs to recover the tax you paid on your inputs.
2. Exempt Supplies (No Tax)
These are services where the government has decided no tax applies, but businesses can't recover costs.
- Examples: Residential rent, most health/dental services, child care, and many educational services.
- Cost: You charge no tax, but you cannot claim ITCs. The GST/HST you pay on your expenses becomes a "sunk cost."
Comparison Summary
| Feature | Zero-Rated | Exempt | |---------|------------|--------| | Tax Charged | 0% | None | | ITC Eligibility | Yes | No | | Typical Category | Essential Goods | Social Services |
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