Can Canadian businesses actually opt-out of GST holiday?

The guidance on whether businesses across Canada can opt-out of providing a GST holiday for consumers has been less than clear.

Earlier this week, 1130 NewsRadio brought you a story about some local restaurants trying to opt-out of or outright rejecting the federal government’s requirement to provide a five per cent relief on some consumer goods.

On one hand, the Canadian Federation of Independent Businesses maintains it is not mandatory that its members offer the temporary tax break on the GST.

However, the Canada Revenue Agency says it “strongly encourages” compliance with the tax holiday.

“Bill C-78 has now received royal assent. As a result, from December 14, 2024, to February 15, 2025, businesses should not charge GST/HST on qualifying goods and services,” the CRA said in a statement to 1130 NewsRadio on Thursday.

The CRA explains that if a business continues to charge an amount and indicates to its customers that the tax has been charged, the business is still then required to account for and remit any GST collected — as per the normal rules.

“Section 285 of the Excise Tax Act (ETA) provides penalties for gross negligence for non-compliance. This is for situations where businesses knowingly did not collect tax or collected tax but did not remit the tax,” the CRA explained.

“The CRA will take a practical approach to compliance, and we will dedicate our efforts towards situations in which businesses willfully and egregiously refuse to comply with the temporary measures.”

While Mark von Schellwitz with Restaurants Canada shares that he’s not sure about the legality of opting out, he believes the tax break is already benefitting the hospitality industry.

“I’m not a lawyer, but I’m not sure if that’s even legal,” he told 1130 NewsRadio.

“It just seems counterintuitive to me, because five per cent is five per cent. Especially if you’ve got value-conscious guests out there, why would you not take advantage of that?”

One restaurant who spoke to 1130 NewsRadio last week shared that it was not offering the tax break to its customers, saying it’s costly and confusing.

“Because it’s not a holiday tax relief for us — we continue to pay GST on our rent, our gas, our electricity,” said owner Gino Bercan.

“So I said ‘Nah, we’re not doing it.’ We continue to pay GST on it, and we pay and we write that off against what we collect. It’s going to cost us money.

“I can’t see why it has to be a nickel and dime thing here and nickel and dime thing there. It’s either all or none. It’s complicated — way too complicated,” Bercan added.

But von Schellwitz believes that now it’s been more than a week since the GST holiday came into place, operators should be “pretty clear” about what needs to be zeroed out and what needs to still be charged.

He feels the GST holiday will help draw in customers during the slower weeks after the holidays.

“I certainly think it could have more of an impact in those January, early February days, which are usually slower and then those restaurants can actually advertise lower prices to try and entice people to come in,” he shared.

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