The GST Holiday and Its Impact On Small Businesses
December 13th, 2024
Posted in: Tax
The Canadian federal government is implementing a temporary GST/HST holiday from December 14, 2024, to February 15, 2025. Some essential goods will be exempted from the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) for this period.
Some of the good to be exempted:
Prepared foods and snacks: Vegetable trays, pre-made meals, salads, sandwiches, chips, candy, granola bars, etc.
Dining: Restaurant meals (dine-in, takeout, or delivery).
Beverages:
Beer, wine, cider, and sake.
Pre-mixed "ready-to-drink" alcoholic beverages 7% or less ABV (alcohol by volume).
Children's products: Children's clothing, footwear, car seats, diapers, and other important family items.
Toys and entertainment: Children's toys (board games, dolls, video game consoles, etc.) and books, print newspapers, and puzzles for all ages.
Christmas trees and other holiday trees. (list from https://www.cfib-fcei.ca/en/site/gst-holiday)
The list from the federal government can be found here. And this video gives an overview of the proposed GST holiday.
For small businesses, this tax break offers both opportunities and challenges.
Opportunities for Small Businesses
Increased Sales
The tax holiday may increase consumer spending, particularly during the busy holiday and New Year periods. Small businesses, especially in retail, can capitalize on higher customer traffic and increased sales of exempt goods.
Marketing Boost
Highlighting the tax exemptions in promotions can attract cost-conscious shoppers. Tailored marketing strategies could help businesses stand out during this period.
Challenges to Consider
Tax Compliance
Exemptions apply only to specific items, so accurate record-keeping is essential. Point-of-sale (POS) systems must be updated before and after this period to reflect these changes, ensuring smooth transactions and proper reporting.
Impact on Cash Flow
While exempt items will not be taxed, businesses still remit GST/HST on non-exempt goods. Additionally, input tax credits (ITCs) for exempt goods may be affected, making cash flow management critical.
How to Prepare
Stay Informed: Review the finalized list of exempted items and adjust your pricing strategies accordingly.
Update Systems: Ensure your POS systems reflect tax exemptions accurately to avoid errors, both before and after the tax holiday.
Train Staff: Educate your team on processing exempt transactions and answering customer questions.
Consult Your Accountant: Seek advice to understand how the holiday affects ITCs and your tax obligations.
Final Thoughts
The GST/HST holiday is a temporary measure, but its effects can linger. Small businesses that prepare effectively can maximize the benefits while minimizing disruptions.
Need help navigating these changes? Contact Shaw & Associates today to ensure your business is ready for this unique opportunity.
Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.