The value-added tax which is usually referred to as VAT is a kind of tax that is slightly alike with sales tax. It is a consumption tax that is charged on a product at every stage when the value is added to the product, and not just during the production of the good, but also during its stages of distribution. This means that the Value-Added Tax is continuously charged on a product at every stage of the supply chain, from production to the point of sale.

Value Added Tax in Canada

The VAT is calculated as the amount that is left when the cost of the product, and those of the materials used in its production (that have already been taxed), have been deducted. This tax is known in some other countries as other things. Canada, for instance, labels the Value-added Tax as a Goods and Services Tax (GST).

For Canada, the Goods and Services Tax (GST) was introduced in 1991 by the Federal Government of the country at a rate of 7%. But over time, the rate of the tax dropped to 5%, which is presently the current rate. Canada although runs on this uniformed GST rate, it is HST (Harmonized Sales Tax) differs across provinces, and there are some areas in Canada that don’t even pay the HST. These areas are Alberta, Northwest Territories, Yukon, and Nunavut. They only pay the 5% flat rate of the Goods and Services Tax.

The HST is the combination of the duo- the GST and the provincial sales tax. The duo in New Brunswick is charged at 13%, Labrador also charges 13%, while in British Columbia, it is 12%, and Ontario charges 13%. Meanwhile Newfoundland, Nova Scotia, and Prince Edward Island all charge 15% Harmonized sales tax.

The Goods and Services Tax and the Harmonized Sales Tax are both collected by and paid to the Government of Canada. There is the condition, according to Canadian law, that GST payers can get compensation for payment from the State government. But this is given the fact that they are able to provide the GST number of the company whose product they purchased.

For Canada, the Goods and Services Tax and the Harmonized Sales Tax, apply to almost all good types, including those goods and services that were not produced in the country but were only imported for sales.

Like I earlier mentioned, the Goods and Services Tax has a standard rate of 5% in Canada, but for most of the goods that lists their price in their advertisement, beware that the mentioned prices do not include the Goods and Services Tax. This is because the tax is usually calculated at the time of payment for goods or services. Although some goods stand as exceptions to this rule.

Such goods like motor fuels always have their advertised/ posted prices as an inclusion of the sales and excise taxes. Another exception is the goods that you buy off the vending machine. Their prices always already include these taxes,  alcohol in monopoly stores, grocery goods, prescription drugs,  transportation services, and medical devices are also exceptions.