Sales and Excise Tax Measures for Canada in 2021

The advent of the COVID-19 pandemic resulted in a massive increase in online shopping as many people became bored at home during the lockdown and started buying products or services online to pass the time.
The contribution of digital businesses to the Canadian economy increased by leaps and bounds during 2020 and 2021, which encouraged the government to introduce new goods and services tax (GST) or harmonized sales tax (HST).
Let’s discuss some of the new GST/HST rules that were proposed in the 2021 budget.

GST/HST Applied on Non-resident Suppliers and Digital Platform Operators

The Federal Government of Canada introduced new GST/HST rules on 30 November 2020, which were explicitly focused on non-residents of Canada. These included foreign entities, who were selling products and services to Canadian consumers but didn’t have a physical store in the country.

These new rules would also apply to operators who use digital platforms to provide service to Canadian residents, such as streaming platforms for music and movies and delivery of tangible goods to Canadian locals such as products shipped from overseas.
Based on the new rules, the platform operators are jointly and severally liable to collect GST/HST on sales they facilitate using third-party vendors. The suppliers and operators must register their products and services and charge GST/HST on them. However, these suppliers would not be eligible for input tax credits.

All non-resident suppliers whose revenue earned from local Canadians are more than $30,000 must register according to the new HST/GST rules. These suppliers and platform operators must register and file an information tax return on an early basis.

All the above-mentioned tax measures will come into effect from 1 July 2021, and the suppliers and operators must comply with these changes within a 12-month transitioning period.

Excise Tax on Purchased Goods

The federal budget of 2021 suggested an increase in the tobacco excise duty rate by $4 on each carton that contains 200 cigarettes. Furthermore, a new excise duty would apply to vape products next year.
Additionally, the budget proposed introducing a tax on the retail sale of luxury cars and airplanes for personal use that cost over $100,000 and boats that are priced for more than $250,000.
Are you interested in knowing how the new sales and excise tax measures will affect your business? Get in touch with us at Faber LLP. We’re an accounting firm in Edmonton, and we have a team of tax planning consultants who can help your business with effective tax planning. Contact us today.