GST/HST on Canadian Groceries: Taxable vs. Zero-Rated Items

GST is short for “Goods and Services Tax.” This tax applies to most goods and services sold or provided throughout Canada. The GST has also been combined with the provincial sales tax in a few areas, including Ontario, Nova Scotia, Labrador, New Brunswick, Newfoundland, and Prince Edward Island. This combined sales tax is called the HST or “Harmonized Sales Tax.” By having just one HST, these provinces make it slightly less confusing for businesses and individuals to pay applicable sales taxes. There is a GST/ HST on groceries in some situations. Jeremy Scott Law may be able to help you fully understand the HST and GST in your area. Call (902) 403-7201 for more information.

Understanding the Zero-Rating System

Business owners must charge GST or HST on their products based on rules set out in the taxing legislation. However, knowing whether these taxes apply to each specific good is not always clear. As a rule, “basic groceries” have a GST or HST rate of 0%, but the term basic groceries has a very specific definition. Basic groceries are also referred to as zero-rated foods. By way of example, the following goods will usually be considered zero-rated foods with a GST/HST rate of 0%.

• Milk
• Vegetables
• Grain
• Canned Foods
• Raw Meat
• Fish

Non-Grocery Zero-Rated Items

Some other items that are not groceries also receive zero-rated treatment. These include things like prescription medications, certain medical devices (like hearing aids) and feminine hygiene products. The Government of Canada has determined that these basic products should not be taxed so citizens can get essential goods at a lower price than other, less critical goods or services.

Grocery Items Excluded From Zero Rating

 By contrast, some groceries are specifically excluded from the zero rating. These foods are more like snacks and sugary items. Examples of foods excluded from the zero rating include the following.

• Alcoholic beverages
• Carbonated beverages
• Fruit beverages with less than 25% real fruit juice
• Candies
• Bars (including some granola and fruit bars)
• Pre-made Salads and Sandiches
• Chips, puffs, and other snack foods

Excluded products generally do not have the same type of health value that an individual would get from basic groceries like milk, bread, and vegetables. As a result, the Government of Canada has chosen to tax these items at higher level to encourage healthy consumption. The difference between a taxable item and a non-taxable item can be significant, especially in areas where the tax rate is in the double-digits.

How Much Is the HST on Groceries in Canada?

The HST on groceries varies based on location. However, zero-rated goods with a 0% tax have the same 0% rate throughout the country. Taxes on other items vary based on the province. The current rates are set out in the following table.

Rates also vary when individuals or companies must move products throughout several territories. In general, the rate where the produce is supplied will apply to the sale. The Canada Revenue Agency provides specific guidance on how to determine the “place of supply” to determine the correct rate for the HST or GST on the transaction.

Tax Rates on Common Foods in Canada

It might be helpful to review a few examples to understand the HST on groceries. Essentially, unless the food falls under the zero-rated category, the full value of the GST or HST will be charged, whichever applies in that location. To get more specific information, consult a Canada tax lawyer, such as Jeremy Scott Law.

Is Baby Formula Taxed in Canada?

Baby formula is taxed at 0%, along with some other baby supplies and products.

Is Rice Taxable in Canada?

Basic, uncooked rice is a zero-rated item throughout Canada as it qualifies as a basic grocery item. However, if rice is an ingredient in another product, that does not mean that product is not taxable. The most common example of these is rice crisps or chips. Although rice may be one of the main ingredients, those foods are more snack products than basic groceries, so they will be subject to GST or HST, depending on the area.

Is There a Tax on Dog Food in Canada?

Foods that are not made for human consumption are not exempt from GST or HST. Pet food and treats designed for animal consumption will be taxed at the applicable rate in that area.

Are Vitamins Taxable in Canada?

Although vitamins and supplements may be considered health products or dietary aids, they are still taxable. These products are not considered basic groceries. These include pills, tablets, and capsules. However, some meal replacement shakes and formulas are not taxable.

Is There a Tax on Coffee in Canada?

Coffee beans are considered a basic grocery and therefore have a 0% GST or HST throughout the country. Hot beverages sold in a cup or “dispensed,” are generally taxable. Essentially, purchasing the finished product rather than the supplies to create the beverage will be subject to GST or HST.

Are Foods at Restaurants Taxed?

In general, any prepared food will be subject to either the GST or HST, depending on the location. These taxes are usually passed along to the individuals, but like other types of businesses, restaurants must pay the GST or HST to the appropriate taxing authority. Restaurants Canada provides a helpful chart that sets out the applicable tax rates in each territory or province throughout Canada.

Final Comments

Determining whether a product qualifies for Zero Rating or is a fully taxable product can be challenging.   For example, while a salad is taxable, a salad kit may be sold on a Zero Rated basis.  Certain sandwich products are zero rated only if sold in a frozen state.

Get Help with GST and HST Taxes in Canada

GST and HST on groceries can be complicated for both individuals and businesses. If you need assistance with GST and HST compliance for yourself or your company, Jeremy Scott Law may be able to help. Contact our office by calling (902) 403-7201 for more information or to schedule an appointment.