A zero-rated supply is taxable at 0%; an exempt supply has no GST/HST applied to it. Neither generally adds GST/HST to the customer’s bill, but the distinction affects registration calculations and the supplier’s ability to recover tax on expenses. The $30,000 small-supplier rule is a separate registration test: it does not turn an otherwise taxable sale into an exempt supply. CRA: type of supply.
Compare the three categories
| Supply | GST/HST charged | Business purchases | Small-supplier test |
|---|---|---|---|
| Taxable at a positive rate | Applicable GST/HST rate | A registrant may claim eligible input tax credits (ITCs) for commercial use | Generally included |
| Zero-rated | 0% | A registrant may claim eligible ITCs for commercial use | Generally included |
| Exempt | No GST/HST | ITCs generally cannot be claimed for expenses used to make exempt supplies | Generally excluded |
ITCs require registration, eligible commercial use and adequate documentation; a zero-rated sale does not create an automatic refund for every purchase. Some public service bodies may qualify for a separate rebate on expenses related to exempt supplies. CRA: type of supply; CRA: input tax credits.
Examples of zero-rated supplies
The CRA lists basic groceries such as milk, bread and vegetables; prescription drugs; and certain medical devices among examples of zero-rated supplies. Specific food categories such as soft drinks, candy and snack foods can be taxable, so do not code every grocery-store item at 0%. Certain exports may be zero-rated when the relevant conditions are met; a foreign billing address alone is not enough to classify every service. CRA: supply examples; CRA: basic groceries; CRA: exports.
Example: A registered grocer sells a qualifying loaf of bread for $5. The GST/HST on that supply is $0. If the grocer pays GST/HST on an eligible commercial expense, the grocer may claim an ITC subject to the normal requirements. The sale remains a taxable supply for the small-supplier calculation.
Examples of exempt supplies
CRA examples include most health and dental services provided by licensed physicians or dentists for medical reasons, most long-term residential rent and many financial services. The facts and statutory conditions matter: a service performed by a health professional is not automatically exempt in every circumstance. CRA: type of supply.
Example: A qualifying exempt residential rental has no GST/HST added to the rent. The landlord generally cannot claim ITCs for expenses used to make that exempt rental. An exempt sale and a taxable sale to an eligible purchaser receiving special tax relief are different situations.
What if an expense supports both activities?
Separate expenses used exclusively in commercial activities from those used exclusively to make exempt supplies. For shared costs, apply the relevant CRA allocation rules and keep the calculation. For example, the CRA illustrates a fair and reasonable allocation where 70% of a utility bill relates to a taxable store and 30% to a residential apartment; subject to the other conditions, 70% of the HST on that bill is eligible for an ITC. Particular rules apply to different kinds of property and expenses. CRA: calculate the ITC eligibility percentage.
Is the $30,000 small-supplier rule an exemption?
For most businesses, the CRA looks at worldwide taxable revenue, including zero-rated supplies and relevant associated-person revenue, over a single calendar quarter and over consecutive quarters. Exempt supplies are generally excluded. Exceeding the limit in one quarter has different timing from exceeding it over four quarters. A qualifying unregistered small supplier generally does not collect GST/HST and cannot claim ITCs; eligible businesses may choose to register voluntarily. Some activities, including taxi and commercial ride-sharing, have special registration requirements. CRA: when to register.
Does a provincial PST exemption also remove GST?
No. BC PST, Saskatchewan PST, Manitoba RST and Quebec QST each have their own rules. Check each tax independently. For example, BC lists certain printed books and qualifying children’s clothing among PST exemptions; the federal GST/HST classification must still be checked. BC: PST exemptions and documentation.
A BC purchaser buying qualifying goods solely for resale can generally give the seller its PST number; an eligible purchaser without one may use the applicable certificate, such as FIN 490, when its conditions are met. The seller must retain the required evidence. A certificate does not turn a non-qualifying purchase into an exempt purchase. BC: exemption documentation; FIN 490.
What about GST/HST relief for First Nations purchasers?
CRA’s section 87 guidance describes relief for eligible status-registered individuals, bands and band-empowered entities in specified circumstances. For example, eligible property bought off reserve and delivered to a reserve by the seller or its agent may qualify; the seller must retain the required status and delivery evidence. Rules vary by purchaser, property or service and transaction, and other First Nations taxes may apply. Status alone does not make every off-reserve purchase tax-free. CRA: GST/HST and First Nations peoples.
Sources checked October 16, 2026.