The Canada Revenue Agency categorizes goods & services into three groups:
- Taxable – GST/HST is charged, collected and remitted. As a registrant, you may also claim credits (called Input Tax Credits, or ITC’s) for GST/HST paid to produce the goods and services.
- Zero-rated – GST/HST is not charged, collected or remitted, but as a registrant, you can claim ITC’s for GST/HST paid to produce the goods and/or services. If your business is selling cucumbers at the farmer’s market, for example, no GST/HST is charged/collected from your customers because fresh vegetables are zero-rated. Also, if you are selling your services to businesses outside of Canada that are not registered, those sales would be classified as zero-rated as well.
- Exempt – GST/HST is not charged, nor collected and as the registrant, you can not claim ITC’s for any GST/HST paid. Examples of exempt services include music lessons and childcare fees.
For more information, please read our article, here.