Local · CA
What is the difference between zero-rated and exempt GST/HST supplies?
Short answer
Zero-rated supplies are taxable at 0%, while exempt supplies are generally outside GST/HST collection. The distinction matters because eligible input tax credits may be available for costs supporting zero-rated supplies but generally not exempt activities.
Detailed answer
Classify the supply correctly
Both types can appear on an invoice without GST/HST collected, but they are not the same for registration, reporting or credits. Classification depends on the specific supply and conditions. Zero-rated supplies generally count towards the ordinary small-supplier taxable-supply test, while exempt supplies are treated differently.
Allocate related costs
A business with both commercial and exempt activity may need to allocate expenses and limit credits. Keep evidence supporting the classification and business use of purchases. Review cross-border sales and unusual services with your adviser before choosing a software tax code. A 0% code alone does not establish that a supply is legally zero-rated.
Official sources
Published by Expert Bookkeeping Services · Last updated 2026-11-01. General information only — confirm specifics for your situation with a qualified adviser.
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