Ontario HST Point-of-Sale Rebates

Definition

Ontario HST point-of-sale (POS) rebates reduce the HST collected on certain categories of goods from the full 13% rate to just the 5% federal portion, by rebating the 8% provincial component at the time of sale. These rebates are administered by the vendor and provided under the Deduction for Provincial Rebate (GST/HST) Regulations. The rebate is not the same as a zero-rated supply: the supply remains fully taxable at 13%, but the vendor is entitled to deduct (or credit to the customer) an amount equal to the 8% provincial portion on qualifying items.

Key rules

• The following categories qualify for the 8% point-of-sale rebate in Ontario:
  • Qualifying printed books, spoken audio books and scripture; bundled books qualify only under the specific composite-property rules
  • Children's clothing meeting the prescribed design and size criteria
  • Children's footwear (up to specific sizes for boys, girls, and men's sizes up to 6)
  • Diapers designed for babies and children. Adult incontinence products are generally zero-rated under separate rules; qualifying feminine hygiene products have been zero-rated since July 1, 2015
  • Newspapers (published at regular intervals, containing news, editorial content, etc.)
  • Qualifying prepared food and beverages sold for a total charge of $4.00 or less (per customer, per transaction, for immediate consumption)
  • Child car seats and booster seats
• Vendors must charge HST at the combined 13% rate and then credit the 8% on the invoice, or alternatively charge only 5% from the outset. Either presentation is acceptable so long as the rebate is passed through to the customer.
• The vendor may report the net 5% tax, or report the full 13% and deduct the provincial rebate as an adjustment (line 107 on a paper return; included in line 108 electronically). Do not report net tax and also deduct the rebate. CRA return instructions.
• The vendor must maintain records sufficient to demonstrate the nature of each rebated supply (invoices, product descriptions, size tags for children's clothing, etc.) for six years.
• Mixed transactions (taxable items with and without rebate) require item-level tax calculation. A receipt should show the tax applied per item or an acceptable aggregated breakdown.

Example

A Toronto bookstore sells a $30 paperback novel, a $20 children's sweater (size 6), and a $40 adult jacket in a single transaction. The HST treatment is:

Before other ITCs or adjustments, the store reports net HST of $7.70, or reports $11.70 and deducts the $4.00 rebate. Both approaches produce the same result.

Common mistakes

• Deducting a rebate after already reporting only the net 5% tax. Preserve qualifying-item records whichever permitted reporting method is used.
• Applying the rebate to items that do not qualify. Adult-sized footwear, non-book educational materials (calendars, colouring books, directories), and large-format magazines do not qualify. Review CRA GI-064 through GI-068 for specific guidance.
• Missing the size thresholds for children's clothing. The rebate requires specific garment sizes listed in Ontario regulations; "teen" sizing above the threshold does not qualify even if marketed for children.
• Forgetting the $4 ceiling on prepared food. Combo meals that cross $4 lose the rebate entirely, even by one cent.

Related concepts

• Ontario HST
• GST/HST Overview
• Taxable, Zero-Rated, and Exempt Supplies
• Input Tax Credits (ITCs)