The federal government says Canadians will get a “GST holiday” on groceries this holiday season — while those making under $150,000 annually will also be getting a cheque.
Prime Minister Justin Trudeau made the announcement on Thursday, temporarily putting a break on the goods and services tax on a slew of items, including certain groceries, kids’ clothing, footwear and diapers.
The new tax break, which will start on Dec. 14 and will be in effect for two months, will also apply to restaurant meals, snacks, beer and wine, prepared foods, children’s toys, books, print newspapers, puzzles and Christmas trees.
“Canadians are going to get a real break on everything they do,” Trudeau said.
In addition, Canadians who worked in 2023 and earned up to $150,000 will also receive a cheque worth $250 in April.
Trudeau said these measures, which will need to be passed by Parliament, will help Canadians on the cost of living ahead of the holidays and the new year.
“We know people are under pressure. This is there to help them.”
Deputy Prime Minister and Finance Minister Chrystia Freeland said the “GST holiday” will offer relief to families struggling to make ends meet and comes at a time when inflation has also slowed down.
“Lifting the GST is going to make it that little bit easier, and it comes just in time for the holidays,” she said.
“This is really about saying to Canadians, things have been hard. They are getting better.”
Freeland added that inflation coming down to the Bank of Canada’s two per cent target range for 10 months in a row and interest rate cuts have “created the space for us to provide a little more relief for hard-working Canadians.”
According to the federal government, the proposed GST cut will save taxpayers an estimated $1.6 billion over two months.
Which grocery items are getting a GST break?
Under Canadian tax law, items classified as basic groceries are already not subject to the GST/HST.
According to the federal legislation, that includes “fresh, frozen, canned and vacuum sealed fruits and vegetables, breakfast cereals, most milk products, fresh meat, poultry and fish, eggs and coffee beans.”
Under the proposed measures announced Thursday, the following food and beverage items will get a tax break for two months:
- Alcoholic beverages (excluding spirits but including wine, beer, ciders, and spirit coolers up to seven per cent ABV)
- Carbonated beverages, non-carbonated fruit juice or fruit flavoured beverages or products that, when added to water, produce one of these beverages
- Candies; confectionery classed as candy or goods sold as candies (e.g., candy floss, chewing gum, and chocolate); fruits, seeds, nuts or popcorn coated or treated with candy, chocolate, honey, molasses, sugar, syrup, or artificial sweeteners
- Chips, crisps, puffs, curls, or sticks (e.g., potato chips, corn chips, cheese puffs, potato sticks, bacon crisps, and cheese curls), popcorn, brittle pretzels, and salted nuts or seeds
- Granola products and snack mixtures that contain cereals, nuts, seeds, dried fruit, or other edible products
- Ice lollies, juice bars, ice waters, ice cream, ice milk, sherbet, frozen yoghurt or frozen pudding, including non-dairy substitutes
- Fruit bars, rolls or drops or similar fruit-based snack foods
- Cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating (note that many bread products, such as bagels, English muffins, croissants, and bread rolls, are already zero-rated)
- Pudding, including flavoured gelatine, mousse, flavoured whipped dessert product, or any other products similar to pudding
- Prepared salads, sandwiches, platters of cheese, cold cuts, fruit or vegetables, and other arrangements of prepared food
- Food or beverages heated for consumption
- Beverages dispensed at the place where they are sold
- Food or beverages sold in conjunction with catering services
- Food or beverages sold at an establishment where all or substantially all of the food or beverages sold are currently excluded from zero-rating (e.g., a restaurant, coffee shop, take-out outlet, pub, mobile canteen, lunch counter, or concession stand)
- Bottled water or unbottled water that is dispensed at a permanent establishment of the supplier
Conservative Party Leader Pierre Poilievre called the government’s announcement a “tax trick.”
Speaking to reporters in Ottawa on Thursday, Poilievre said the temporary GST break “would not make up for the permanent quadrupling carbon tax on heat, housing, food and fuel.”
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The Conservatives added in a released statement that “Canadians deserve relief, not more fake announcements that will do nothing to make life more affordable.”
Poilievre wouldn’t say if Conservatives will support the legislation. The party called for temporary GST relief on gasoline during the summer to help address affordability.
The New Democratic Party said it will vote in favour of the GST break.
NDP Leader Jagmeet Singh took credit for the announcement, telling reporters the Liberals had “caved” to his party’s demands. But he added the bill was also a “Liberal letdown” for being temporary and not waiving the GST on home heating and other monthly bills, which the NDP has called for.
“We know that middle class families need a break, so we’re going to work as hard as possible to get this done as quickly as possible,” he said.
Singh added he wanted to see the legislation passed in “one day,” despite an ongoing Conservative-led filibuster in the House of Commons preventing government business. The NDP has declined to support the Liberals in ending the filibuster, which is related to the release of government documents to the RCMP.
“We don’t want to let the Liberals off the hook, but we want to see some relief for middle-class families, for working-class families. We’re prepared to do that,” he said.
Bloc Québécois Leader Yves-François Blanchet accused the Liberals of abusing the public purse to improve their position in the polls.
“The Liberals have shown that when they need billions of dollars in order to literally buy votes, they find it,” he told reporters Thursday.
Will these measures help the affordability problem?
The announcement has received a mixed response from businesses and advocacy groups.
The Canadian Federation of Independent Businesses welcomed the GST break, but said “Canadians need permanent, not temporary tax relief.”
In a statement on Thursday, CFIB president Dan Kelly said: “The temporary sales tax holiday will be reasonably straight forward and welcome in some sectors like restaurants and food service businesses but may add confusion and complexity for general retailers with both taxable and new exempt items.”
“It will require retailers to reprogram point of sale systems twice in a two-month window. In addition, some small manufacturers and retailers will undoubtedly question why they are excluded from the exemption.”
Restaurants Canada called it a “big win” for the industry, which is still recovering from pandemic losses.
“Today’s announcement restores some much-needed hope to our industry and we are optimistic it will translate to increased spending at local restaurants across the country,” Kelly Higginson, president and CEO of Restaurants Canada, said in a statement.
Allison Venditti, founder of Moms at Work, an advocacy group that supports working mothers, said the announcement is more of political play ahead of next year’s federal election and doesn’t go far enough to help Canadians.
“It really does feel like there’s an election coming, let’s hand out cheques and tell you that you’re going to save $2 on your Christmas tree,” she said in an interview with Global News.
“It’s not a great push in the right direction. It seems very short-term.
“I think it needs to be more thought-out and not just another government throwing cheques at people. They’re throwing cheques of our tax dollars back at us when what we want is an investment to make Canada a better place.”
The GST break is set to end on Feb. 15, 2025.
The Canadian Taxpayers Federation said a temporary GST holiday “won’t cut it.”
“The tax relief is helpful now, but do politicians really think taxpayers will be able to afford to pay more for all of these essentials on Feb. 16?” Franco Terrazzano, CTF’s federal director, said in statement.
Michael Smart, an economics professor at the University of Toronto, said the measures announced by the federal government will have a “pretty small impact on affordability” and “the richest among us are going to save the most” since they spend a lot more during the holidays.
Smart estimates that an average family of three in Canada might end up saving about $150 if those taxes come off for two months.
Instead of the GST break, Smart said sending every family a cheque of $150 would have been a “better choice,” especially for low-income families who don’t pay as much tax as it is.
However, Smart said the GST cut could help out retailers as people spend more and push the economy forward.
“Cut the GST and the HST just for a short time, tell people there’s a limited-time sale, spend now. That will encourage more spending in the economy. It might get the economy firing on all cylinders again.”
—With additional files from Global’s Sean Boynton and Craig Lord