Bill C-78 – An Act respecting temporary cost of living relief (affordability) is expected to come into force shortly. Adopted following a divided vote by senators, this measure will implement a temporary zero-rating on several items, starting December 14, 2024 and ending February 15, 2025, leaving very little time for businesses to reprogram their systems, twice rather than once, in as many months.
We refer you to the government website for the official announcement from the Department of Finance Canada on November 21 regarding this measure:
https://www.canada.ca/en/department-finance/news/2024/11/more-money-in-your-pocket-a-tax-break-for-all-canadians.html
The initial ambiguity of this announcement regarding whether the items in question would be zero-rated or exempt has now been resolved. The initial announcements spoke of a temporary GST/HST relief, and then of an exemption of GST/HST. However, C-78 is clear that it is a zero-rating. This distinction was important, since the opposite (an exemption) could have had the negative consequence for retail and restaurant operators of no longer being able to continue to claim an input tax credit (ITC) on their expenses related to the supply of these items.
Several of the items covered are subject to various conditions that sometimes require some interpretation (notably printed books, children's clothing and beverages). Payment and delivery times are also important. It is therefore essential to understand these distinctions. The CRA has also provided some examples of items that will be eligible for this temporary tax exemption.
We are well aware that these changes may lead to several questions for retail and restaurant owners. We are available to answer your questions and assist you in the new codification of your products and services.
Michel Lavigne, M. Fisc., CPA
Manager – Consulting Services
mlavigne@consultaxe.com
