GST/HST Zero-rated vs GST/HST exempt goods and services

While most of supplies are subject to the GST/HST, a limited number of supplies are zero-rated or exempt from the GST/HST. If you are a GST/HST registrant, it is important to know the difference between GST/HST zero-rated and GST/HST exempt.

Zero-rated supplies are taxable at the rate of 0%. This means there is no GST/HST charged on the supply of these goods and services. Exempt supplies are good and services that are not subject to GST/HST. So in terms of how to charge your customers GST/HST, there is no difference between zero-rated or exempt supplies. You don't collect GST/HST on either of them.

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However, there is an important difference in how the two types of supplies are treated while you file your GST/HST return.

While you don't collect GST/HST on zero-rated goods and services, you can still claim an input tax credit (ITC) for the GST/HST you pay or payable on purchases and expenses made to provide them.

On the other hand, you are not allowed to claim ITCs to recover the GST/HST paid or payable on expenses related to making exempt goods and services.

 

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