What is GST?

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What is GST?
GST refers to the Goods and Services Tax of Canada. It is a 5% value added tax on most goods and services in Canada. If you’re a business owner in Canada, then you are required by law to charge GST on covered goods and services. If you’re a consumer, then the price that you pay for certain goods and expenses have GST included in the total price.

GST was introduced in Canada at the start of 1991 as a sort of replacement for another tax called MST or manufacturer’s sales tax. This particular tax involved a 13.5% charge on goods and was replaced because it was said to hamper the manufacturing companies’ ability to compete in the export sector. But not all goods and services are imposed with GST. Some are exempt from this form of taxation and these include basic items like groceries, medical-related services, rental fees for homes, financial services, dental services, educational services, day-care services, and legal-aid services. For other commercial businesses, then GST imposition is mandatory.

In some of Canada’s provinces like Nova Scotia, Newfoundland, Ontario, British Columbia, and New Brunswick, GST or goods and services tax is merged with their own PST or provincial sales tax to form HST or Harmonized Sales Tax. Current rate for most provinces stand at around 12% to about 15%. HST is implemented by the Canada Revenue Agency and the resulting revenues are to be divided among Canada’s provinces using a pre-determined formula.

Because of GST, HST, and PST changes in some of Canada’s provinces, people got confused on what type of tax is imposed on goods bought and services availed. Provinces also impose different types and rates of these taxes which add to the confusion of Canadian citizens. And with GST not required by law to be reflected on some goods and services, some businesses will display prices at “pre-GST” rates, which further aggravates consumer confusion/

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