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Understanding GST (Goods and Services Tax)

The Goods and Services Tax (GST) is a federal value-added tax applied by the Canadian government on most goods and services sold for domestic consumption. It is a 5% tax applied across all provinces and territories in Canada, including Quebec.

This tax is ultimately borne by the consumer, but businesses that are registered for GST/HST generally collect the tax and remit it to the Canada Revenue Agency (CRA). Businesses can also claim Input Tax Credits (ITCs) for the GST paid on their own purchases related to their commercial activities.

Understanding QST (Quebec Sales Tax)

The Quebec Sales Tax (QST) is a provincial consumption tax unique to Quebec. Unlike other provincial sales taxes, QST is applied on the selling price which already includes the federal GST. This "tax-on-tax" system is a key characteristic of Quebec's sales tax structure.

The current QST rate is 9.975%. Like GST, QST is collected by businesses from consumers and remitted to Revenu Québec. Registered businesses can claim Input Tax Refunds (ITRs) for QST paid on their purchases.

How GST and QST Interact in Quebec

Quebec is unique in Canada because its provincial sales tax (QST) is calculated on the price of goods and services *after* the federal GST has been applied. This means that if an item costs $100:

• GST (5%) is calculated on $100, adding $5.
• The subtotal becomes $105 ($100 + $5).
• QST (9.975%) is then calculated on $105.

This compounding effect results in a higher overall sales tax burden compared to provinces where provincial sales tax is calculated on the pre-GST price or where HST combines both taxes.

Common Exemptions and Zero-Rated Items

While most goods and services are subject to GST and QST, some are exempt or zero-rated. Understanding these categories is crucial:

• Zero-rated supplies: Certain basic groceries, prescription drugs, and medical devices are taxed at 0%. Businesses don't charge tax, but can claim ITCs/ITRs.
• Exempt supplies: Financial services, residential rents, and certain health/educational services are exempt. No tax is charged, and businesses cannot claim ITCs/ITRs.
• Specific cases: Different rules may apply to services like public transit, childcare, and certain non-profit organization activities. Always consult official sources for specific scenarios.