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Taxes in Canada: What items are you charged GST for and why?

Tampons and pads (Thinkstock)

Beginning July 1, there will be no federal tax on tampons, a major victory for menstruating women across the country. In retrospect, it seems absurd that sanitary products were ever subject to GST in the first place. Sure, they’re “goods”, but they’re not exactly optional, contradicting the premise that essential items aren’t to be taxed.

The recent win for Canadian Menstruators shows that tax rules are hardly straightforward.

Generally speaking, essential items like food and medical supplies are not taxed. But ever since the GST was introduced, countless exemptions have been added and removed, proving that what’s considered “essential” isn’t always cut-and-dry.

The Canada Revenue Agency spells out all the details in The Excise Tax Act, specifically schedule VI, which lists “zero-rated supplies”—those that are not taxed.

There are all kinds of exceptions that will make you scratch your head.

Prescription medications are zero-rated, for instance, but medical marijuana is not.

Most of the mind-numbing inconsistences, meanwhile, fall into the category of “basic groceries”.

Examples of food and beverages that are zero‑rated as basic groceries include fresh, frozen, canned and vacuum sealed fruits and vegetables; breakfast cereals; most milk products; fresh meat, poultry, and fish; eggs; and coffee beans. However, certain categories of foodstuffs are taxable.

If a product’s tax status is in doubt, the CRA “will consider the manner in which the product is displayed, labelled, packaged, invoiced and advertised to determine its tax status.”

Consider these perplexing instances of what’s taxed and what’s not:\

Dealcoholized beer and wine. These are considered to be beer and wine for the purposes of the GST and are therefore subject to tax. Cooking wine, on the other hand, is not. Neither are supplies of food preserved in alcohol.

Cooking wine (Thinkstock)

Soy and rice beverages. Milk-based beverages, including yogurt drinks, are zero-rated. Beverages made from non‑animal sources, such as soy or rice, are not considered to be milk or milk-based beverages and are therefore subject to GST.

Soy beverage (Thinkstock)

Noncarbonated lemon iced tea is zero-rated. Carbonated lemon iced tea and lemon-flavoured bottled water, however, are both taxable.

Non-carbonated lemon iced tea (Thinkstock)

Fruit-flavoured powders or crystals that are mixed with water to make fruit-flavoured drinks are taxable. Syrups, crystals, powder, and flavours for making drinks that are not fruit-flavoured are not.

Fruit drink powder (Thinkstock)

- Plain bottled water sold in a single-serving size bottle (less than 600 mL) is taxable. When plain bottled water is sold in manufacturers’ packages of two or more single serving bottles, or in a bottle that exceeds a single serving, it is zero‑rated.

Bottled water (Thinkstock)

- Cocktail cherries. Under the Act, these are considered baking ingredients and are therefore not taxed.

Cocktail cherries (Thinkstock)

 - Ice cream and similar products that are considered to be packaged in single servings are taxable. “On the other hand, a two-litre container of ice cream that is divided into six portions by pieces of wax paper or plastic, and that has a single lid covering the entire container, would not be considered as "packaged in single servings",” the CRA website notes. “In this case, each portion is not individually contained or wrapped nor is each portion packaged in its own right. In addition, it would not be possible to remove one portion of ice cream from the container without exposing the other portions as the lid covers the entire container; therefore, this two-litre container of ice cream is zero‑rated.”

Ice cream (Thinkstock)

- Packaged cookies are taxable. Cookie dough is not.

Cookie dough (Thinkstock)

- Wedding cakes are GST-free.

Wedding cake (Thinkstock)

- Products consumed by cultural groups are considered “special cases”. The rules don’t get more complicated than this. Products that are not generally recognized as food or beverages in Canada but are consumed as food or beverages by cultural groups are generally considered zero‑rated basic groceries.

 Paan, however, is taxed. This leaf imported from India is commonly eaten after meals to aid with digestion and freshen breath. It’s also used in Hindu prayers and discarded afterward. Sometimes, it’s mixed with tobacco. It’s considered a non-essential food item.  

Paan (Thinkstock)