Ottawa announced plans this week to implement a GST break on items like groceries, children’s clothing, and alcohol in a bid to “put more money in people’s pockets” during the upcoming holiday season.
Items exempt during the proposed tax holiday between Dec. 14, 2024, and Feb. 15, 2025, include “holiday essentials” such as groceries, restaurant meals, beer, wine, and certain items for children such as clothing, footwear, diapers, and toys. Christmas trees will also be tax-free.
Removing the federal sales tax from these goods for a two-month period would save $100 for a family that spends $2,000 on those goods during that time, Ottawa said in a release.
The tax relief also applies to the Harmonized Sales Tax (HST), leading to larger saving in provinces that blend the GST and provincial sales tax, such as Ontario, where the same $2,000 basket of qualifying purchases realize HST savings of $260, Ottawa said.
The holiday tax break is far from a done deal, however. The proposed legislation must be passed in the House of Commons before it can be implemented.
If the legislation proposed by the Liberals is enacted, these are the items that will be exempt from GST and HST.
Groceries
The government has said its tax holiday will mean virtually all food items will be GST/HST-free. The amount of money Canadians will actually save, however, will depend upon the types of foods they purchase.
Shoppers who stick to the basics won’t see any difference at the cash register. That’s because groceries that are considered essentials are already tax exempt in Canada.
GST is not charged on foods such as fruits and vegetables, unflavoured milk, cheese, butter, cream, sour cream, yogurt, eggs, meat and fish, breads and cereals, coffee, tea, canned goods and some frozen foods.
Only households that purchase other offerings will see some savings at the till.
Taxable foods such as carbonated beverages, fruit beverages with less than 25 percent real fruit juice, snack foods, candy, granola bars, ice cream, and baked desserts will all be exempt under the new rules.
Prepared foods such as vegetable trays and pre-made meals will also be tax-free during the GST holiday.
Alcohol and Restaurants
All alcoholic drinks are taxed in Canada currently. Under the proposed tax break, however, beer, wine, cider and pre-mixed alcoholic beverages below seven percent alcohol will be exempt.The tax relief will also extend to meals purchased at restaurants, including dining in, takeout, and food delivery.
Children’s items
Children’s apparel, including baby bibs, socks, hats and footwear, will be eligible for the tax break, as will diapers and car seats.However, footwear, clothing, or costumes designed specifically for children’s sports or recreational activities will not be included in the tax exemption.
Toys designed for use by children under the age of 14 will also be tax-free. While the government did not provide a list of specific toys, items like dolls, action figures, Lego, and stuffed animals may qualify.
Books, Tech, and Christmas Trees
All printed books, including religious scriptures, will qualify for the tax break. Audio books that have at least 90 percent of the recording dedicated to the reading of a printed book are also included.Print newspapers will be exempt from tax, but electronic and digital publications and most magazines will not be.
Christmas trees, natural or artificial, will be included in the tax break as will puzzles and video game consoles.
Will the Legislation Pass?
The tax break is set to begin Dec. 14, but only if the legislation is approved in the House of Commons—something that may not happen any time soon.Parliament has been at a standstill for weeks because of the government’s refusal to hand over documents related to Sustainable Development Technology Canada’s alleged misspending of taxpayers’ money.
The Conservatives want the RCMP to investigate, saying the federal police force should have access to unredacted documents. The House of Commons agreed, passing a motion in June saying Ottawa must hand over all documents.
While the Liberals have released some documents, they have said releasing more could be a violation of privacy rights under the Charter and the request to release to the RCMP could blur the lines between Parliament and the judiciary.
Until the matter is settled, almost all other parliamentary business will be on hold and the government will be unable to advance any bills in the House.
NDP Leader Jagmeet Singh said he plans to support the Liberal legislation announced by Prime Minister Justin Trudeau on Nov. 21 but isn’t prepared to cut the government a break otherwise, and will continue to push for the release of the documents.
“What we’re prepared to do is make sure that there is enough time in the House to get this passed in one day,” Singh told reporters during a Nov. 21 media scrum. “We don’t want to let the Liberals off the hook, but we want to see some relief for middle class families.”
Conservative Leader Pierre Poilievre said it was difficult for his party to express support based solely on an announcement by the prime minister.
“We haven’t seen the measure. We’ve seen his press releases,” Poilievre told reporters on Nov. 21. “I don’t vote for press releases and press conferences. Canadians cannot eat press conferences or live in press releases … Let’s see what they put before us.”
Trudeau was quick to criticize both the NDP and Conservatives in turn.
He said it was “bewildering” to see the NDP allowing the Conservatives to bog down Parliament with “procedural filibusters” that could prevent the tax break from passing.
“Enough is enough,” he said during the press conference. “Let’s actually get Parliament working to deliver for Canadians. It’s about time.”
Business Concerns and Criticism
Even if the legislation is pushed through, the tax exemption will not be smooth sailing for many retailers, Canadian Federation of Independent Business (CFIB) president Dan Kelly said.“The temporary sales tax holiday … may add confusion and complexity for general retailers with both taxable and new exempt items,” Kelly said in a statement. “It will require retailers to reprogram point of sale systems twice in a two-month window.”
He said the promised exemption will not apply to all alcohol, and will leave some producers out in the cold. While beer and wine will be tax-free, whiskey and other liquors will not.
“It is hard to explain to a small producer of spirits why their products are taxed while other alcoholic beverages are not,” he said.
The Retail Council of Canada (RCC) said the holiday tax break would be welcome for retailers who qualify, particularly during the first six weeks of the new year, “which is typically the slowest” sales period.
“While we would have preferred to see a broader range of goods included in the tax relief measures, having more money overall in consumers’ wallets should also benefit sellers of other goods not captured in today’s announcement,” the RCC said in a statement.
Poilievre criticized the government’s proposal, calling it a “temporary two-month tax trick” at a time when the economy is reeling from the impact of the carbon tax.
The Conservatives said the tax break was not substantial enough to make up for the “permanent quadrupling” of the carbon tax on heat, housing, food and fuel.
“In just a few months, Trudeau and the NDP plan to raise taxes on all the same items they claim they’re giving you a break on,” the party said in a press release. “Directly through the carbon tax, they'll be raising taxes on heat, on gas, on everything that comes in a truck.”
While Singh has indicated he would support the Liberal legislation, he said it does not go far enough to help Canadians.
“It’s far from the substantial and permanent relief the NDP wants to give Canadians,” Singh said in a statement. “As usual, the Liberals are letting people down with their choice to make this a short-term tax holiday, on only some items.”
Singh also said the Liberal tax cut plan actually came from his party’s Tax-Free Essentials campaign.
Trudeau has described the tax holiday as a way for the government to cut Canadians a break at the checkout counter between Dec. 14 and Feb. 15.
“The tax break over the next two months is going to help on the costs of everything as we approach the holidays, as we get into the new year,” Trudeau said at the press conference. “These are things that recognize that people are squeezed, and we’re there to help.”
