The temporary GST/HST vacation eliminates the GST/HST on certain essential holiday products, such as groceries, restaurant meals, beverages, snacks, children’s clothing and gifts, from December 14, 2024 to February 15, 2025. The Quebec government has not harmonized the QST with this measure.
This measure represents a real headache for Canadian companies. It forces companies to reprogram their accounting systems in the middle of the holiday season. Between the technical complexity, the tight deadlines and the risk of errors, SMEs face a major challenge that raises many practical questions, particularly when it comes to managing meal and entertainment expenses.
Companies incurring food and beverage expenses during this period will therefore not pay GST/HST on these expenses. They will need to adjust their accounting systems to avoid claiming input tax credits on these categories of expenditure. It’s worth remembering that the treatment of GST/HST is parallel to the treatment of meals and entertainment expenses for income tax purposes. In general, companies can only claim back 50% of the taxes paid on these expenses. These expenses can be paid directly by companies or reimbursed to employees via an expense allowance.
Here are the meal expenses covered by the temporary leave.
Meal expenses covered by tax vacation
Prepared meals
Meals and prepared foods, as well as all qualifying non-alcoholic beverages and alcoholic beverages, qualify for GST/HST exemption during the qualifying period (December 14, 2024 to February 15, 2025) when supplied in restaurants, pubs, bars, food trucks, and other establishments serving food or beverages.
Food delivery
When a restaurant charges directly for the delivery of a prepared meal to a customer, the delivery service qualifies because it generally has the same tax status as the prepared meal.
However, when a delivered prepared meal is ordered via a distribution platform, there are 2 distinct transactions:
- The prepared meal is provided by the catering establishment to the customer.
- A delivery service is provided by the platform operator to the customer.
The prepared meal provided by the food service establishment to the customer is eligible for the GST/HST vacation during the eligibility period.
The delivery service provided by the platform operator to the customer is not eligible for the GST/HST vacation.
Cocktails and mixed drinks
Certain beverages that are mixed at the establishment for customers (such as cocktails) may also be eligible for GST/HST vacations.
Mixed drinks that include only eligible beverages such as beer, malt liquor or wine are eligible for the GST/HST vacation.
Product sales
Certain beverages that are mixed at the establishment for customers (such as cocktails) may also be eligible for GST/HST vacations.
Mixed drinks that include only eligible beverages such as beer, malt liquor or wine are eligible for the GST/HST vacation.
For companies selling products covered by the GST vacation, here are the main impacts on your accounting system:
- No impact on input tax credits (ITCs), which continue to apply as normal
- Need to reprogram point-of-sale systems to :
- Identify eligible vs. non-eligible products
- Adjust tax configuration by product category
- Modify billing parameters
- Special attention required for :
- Invoices with deferred payment issued during the period
- Advance payments received before December 14 for goods/services provided during the vacation period
- Returns and exchanges of items purchased before or during the exemption period
- Recommendations:
- Document all system changes
- Increased verification of tax returns
- Train staff in new procedures
- Keep evidence of “reasonable efforts” to comply
Our sales tax experts are on hand to help you navigate this complex measure. We understand the challenges that this temporary change represents for your business, and can help you navigate these new requirements while minimizing the risk of error. For more details on the products concerned, please refer to the official documentation published by the government, or contact us for a personalized consultation tailored to your situation.
Benoit Vallée, CPA
Associate, Commodity Taxes
More questions? We have the answer.
What is the percentage of GST and QST?
In Quebec, two sales taxes apply to most goods and services:
- GST (Goods and Services Tax): 5%.
- QST (Quebec Sales Tax): 9.975%.
The GST is a federal tax that applies first to the initial amount. The QST is then applied to the amount including the GST. The combined rate of the two taxes is therefore 14.975%.
Please note that certain products and services may be exempt from these taxes or benefit from a different rate, such as basic foodstuffs and prescription drugs.
Who is eligible for the GST rebate?
To qualify for the GST rebate, you must meet one of the following criteria:
For individuals (GST/HST credit) :
- Be a resident of Canada
- 19 years of age or older
- Have filed a tax return, even if you have no income
- Have a net family income below the established maximum threshold
For companies :
- Be a GST/HST registrant
- Have paid GST/HST on eligible business expenses
- Keep all supporting documents
For employees :
- Have paid GST/HST on eligible employment expenses
- Have included these expenses in your income tax return
- Obtain a T2200 form signed by the employer
The amount of the refund varies according to your situation, and is generally paid quarterly for individuals. For businesses and employees, the refund is claimed when you file your GST/HST or income tax returns.
