The Goods and Services Tax (GST) is a multi-level value-added tax which was introduced in Canada on January 1, 1991. Canada belongs to 120 countries that impose a consumption tax or “value added tax” on goods and services. GST in Canada replaced a hidden 13.5% Manufacturers’ Sales Tax (MST), while its introduction was controversial the government stated that GST was implemented because the MST hurt the manufacturing sector’s ability to export.

The history of the GST began in 1989, when the Progressive Conservative government of Prime Minister Brian Mulroney proposed to create a national sales tax of 9%. At that time, all the provinces in Canada except for Alberta had its own provincial sales tax.

The main purpose of the GST was to replace the 13.5% Manufacturers’ Sales Tax and Federal Telecommunications Tax of 11%. The federal government was expecting that the removal of the tax will aid Canadian manufacturers in their international competitiveness.

The tax became a controversy right from the beginning. While it was definitely helpful for the manufacturers and was promoted as revenue-neutral in relation to the MST, the opposition stated that the tax would make life more costly for Canadians. After a short stand, Mulroney used a little-known constitutional provision to increase the number of senators by eight temporarily, thus giving the Progressive Conservatives a majority in the upper chamber. The Opposition launched a filibuster and further delayed the legislation. The tax was lowered to 7% and Government defended the tax as a replacement for a tax unseen by consumers because it was placed on manufacturers. Eventually it came into force on January 1, 1991. In 2006 the Conservative Party of Canada reduced the tax by 1% (to 6%) on July 1, 2006 as part of an election promise. On January 1, 2008 they lowered it to 5%, bringing it to its current state.

The GST law is covered by the Excise Tax Act and all the Canadian Revenue Agency (Canada Customs and Revenue Agency before 2003). As of January 2009, the tax is 5% and applies to most goods and services, except for: used residential housing; most health, medical and dental services; day care; music lessons; and certain goods and services provided by non-profit organizations, governments, and other public service bodies. There are also a number of Zero Rated goods and services like: basic groceries, prescription drugs, exports, and any property or service that is for the use of the Governor General. New Brunswick, Nova Scotia and Newfoundland and Labrador, have a combined tax of 13% which is composed of 8% provincial portion and the 5% GST. The aboriginal people in Canada are exempt from payment. Like in many countries with the GST, visitors for up to 60 days can apply to have their tax refunded. When they are leaving the country they can fill out a form at a Canadian airport or some duty free stores at border crossings. After that the visitor sent in original receipts with a stamp by Canadian Customs. Cheques are mailed to the visitor within a few weeks.

To find tax lawyers, business lawyers and lawyers in Canada, please visit http://www.lawyerahead.ca/