While it may look like businesses pay the GST, in most cases they don't. They just pass the GST along to the final consumer. Thus, I describe GST as a "Big Salad" tax, named after the "Big Salad" episode on Seinfeld where George's friend Julie hands Elaine her big salad, giving Elaine the impression that Julie bought the salad, when George was in fact the person who purchased the salad.
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[George and Julie enter] George: Hey, hey. Elaine: Hey. Julie: Sorry we're late. Elaine: No problem. Julie: Here's your big salad. Elaine: Thank you, Julie. Julie: Oh, you're very welcome. So, I guess I better get going. Gotta meet mother at the Guggenheim. Sure you don't want to go? George: No, you go Guggenheim. I'm not much of a Guggenheim. Julie: Sure, George. George: Ya, you go. Julie: Okay, I'll see you later. Goodbye. Jerry: Bye bye [Julie exits] George: Did you see what just happened? Jerry: Well, that all depends. . . George: Did you happen to notice that Julie handed the big salad to Elaine? Jerry: Yeah, so? George: Well, she didn't BUY the big salad. I bought the big salad. Jerry: Is that a fact? George: Yes it is. She just took credit for my salad. That's not right. Jerry: No it isn't. George: I mean I'm the one who bought it. Jerry: Yes you did. George: You think she should have said something? Jerry: She could have. George: Oh, I know. Jerry: Imagine, her taking credit for your big salad. George: You know you buy a big salad for somebody it would be nice if they knew it. Jerry: Obviously. |
| Tax Payer: | Manufacturer (makes desk) | Wholesaler (distributes desk) | Retailer (sells desk to final consumer) | Consumer (purchases desk for own use) |
| Tax Collected: | Sells desk for $500.00; collects $35.00 GST | Sells desk for $800.00; collects $48.00 GST | Sells desk for $1,200.00; collects $72.00 GST | Buys desk for $1,200.00; pays $72.00 GST |
| Input Tax Credits: | Keeps $30.00 (input tax credit) of the $48.00 that was collected. | Keeps $48.00 (input tax credit) of the $72.00 that was collected. | Pays a total of $72.00 GST, but collects nothing. | |
| Tax Remitted to the Government: | $30.00 | $18.00 | $24.00 | |
| So, who pays the total G.S.T. bill? | $72.00 |
Categories of Goods and Services Related to GST
GST Taxable describes all goods and services that are not GST exempt or zero rated. (For example: hotel accommodations, buying or leasing a car, franchise fees, and gasoline.)
GST Exempt goods and services are not subject to GST. Suppliers of such goods or services cannot claim input tax credits to recover the GST they paid to produce such goods or services. Examples include services such as advertising, arranging and issuing insurance policies, child-care services, and many educational services, including music lessons.
Zero-rated applies to a limited number of goods and services that are taxable at the rate of 0%. This means there is no GST charged on the supply of these goods and services, but suppliers of these goods and services can claim an ITC for the GST they pay on purchases and expenses made to produce or provide these goods or services .Some examples of GST zero-rated goods and services are basic groceries, prescription drugs, and exports.