GST/HST Tax Measures

March 23, 2017

Taxi and Ride Sharing Services

The Budget proposes to extend the application of the GST/HST currently applicable to taxi businesses to ride sharing services.

Currently, all operators of a “taxi business” (which is defined in subsection 123(1) of the Excise Tax Act (Canada) to mean a business carried on in Canada of transporting passengers by taxi for fares regulated under the laws of Canada or a province) are required to be registered for GST/HST purposes and collect GST/HST on all fares, regardless of the total amount of sales.

In order to level the playing field and extend the application of the GST/HST to ride sharing services, the Budget proposes to amend the definition of “taxi business” to include a business carried on in Canada of transporting passengers for fares by motor vehicles within a municipality and its environs where the transportation is arranged for or coordinated through an electronic platform or system, such as a mobile application or a website. Operators of such services will be required to register for GST/HST purposes and charge GST/HST on their fares in the same manner as taxi operators.

This amendment will be effective as of July 1, 2017.

Rebate to Non-Residents for Tour Package Accommodations

The Budget proposes to repeal the GST/HST rebate currently available to non-residents of Canada in respect of GST/HST payable on the accommodation portion of eligible tour packages.

This repeal will apply in respect of supplies of tour packages or accommodations made after Budget Day, except that tour packages or accommodations supplied in 2017 will be “grandfathered” and eligible for the rebate if all of the consideration for the supply is paid before January 1, 2018.

Opioid Overdose Treatment Drug – Naloxone

Naloxone is a drug used to treat opioid (e.g., fentanyl) overdoses. Initially, naloxone was only available by prescription. However, on March 22, 2016 Health Canada removed the requirement for a prescription when naloxone is needed for emergency use for an opioid overdose outside hospital settings.

Although prescription drugs, and select non-prescription drugs used to treat life-threatening conditions, are relieved from GST/HST, non-prescribed naloxone does not currently qualify for such relief. The Budget proposes to add naloxone (and its salts) to the list of non-prescription drugs used to treat life-threatening conditions which are available on a GST/HST-free basis.

This amendment will be effected by adding naloxone and its salts to paragraph 2(e) of Schedule VI, Part I of the Excise Tax Act (Canada). This measure is retroactive to March 22, 2016 except that it does not apply in respect of any supply, importation or bringing into a participating province of naloxone on or before Budget Day if GST/HST was charged, collected, remitted or paid in respect of the same. In other words, the retroactivity of this amendment cannot lead to requests for a refund, credit or rebate and does not impact tax already paid over the last year in respect of non-prescription naloxone.

Tobacco and Alcohol Taxes

The Budget proposes to eliminate the 10.5% surtax on profits arising from the manufacture of tobacco or tobacco products in Canada and correspondingly adjust tobacco excise duty rates to maintain the intended tax burden on tobacco manufacturers.

The excise duty rate on cigarettes will increase from $0.52575 to $0.53900 for each five cigarettes or fraction thereof. Inventories of cigarettes held by manufacturers, importers, wholesalers and retailers at the end of Budget Day will be subject to a tax of $0.00265 per cigarette. Taxpayers will have until May 31, 2017 to file returns and pay the inventory tax. The excise duty rate on tobacco sticks will increase from $0.10515 to $0.10780 per stick. The excise duty rate on manufactured tobacco will increase from $6.57188 to $6.73750 per 50 grams or fraction thereof. The excise duty rate on cigars will increase from $22.88559 to $23.46235 per 1,000 cigars, and the additional duty rate on cigars from the greater of $0.08226 per cigar and 82% of the sale price or duty-paid value to the greater of $0.08434 per cigar and 84% of the sale price or duty paid value.

These measures will be effective as of the day after Budget Day.

The Budget also proposes that excise duty rates on alcohol products be increased by 2% effective the day after Budget Day, in respect of duty that becomes payable after that date. No special inventory tax will apply to alcohol products on which duty has been paid.


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