End GST/HST on Carbon Charges

Summary#

This bill changes the federal Excise Tax Act to stop charging the goods and services tax (GST) or harmonized sales tax (HST) on top of federal and provincial carbon charges. It also sets GST/HST at 0% (zero‑rates) trades of emission allowances. The bill makes related technical changes to keep the law consistent.

• Ends GST/HST on charges under the federal Greenhouse Gas Pollution Pricing Act (GGPPA) (Bill s.154(2.1)(a)).
• Ends GST/HST on any provincial carbon levy (Bill s.154(2.1)(b)).
• Zero‑rates the sale of emission allowances (Schedule VI, new Part XI).
• Repeals two subsections tied to collection and rebates, and adjusts assessment timing language (repeals s.221(2.1), s.261(2.1); amends s.298(1)(b)).

What it means for you#

• Households

  • You would no longer pay GST/HST on the carbon charge line on fuel or home heating bills where that charge is listed. This removes the “tax on a tax” on that specific carbon charge (Bill s.154(2.1)).
  • The savings equal the GST/HST rate in your province multiplied by the carbon charge portion only. It does not change the underlying carbon price set by other laws (Bill s.154(2.1)).
  • Start date: Not specified in the bill text provided. Standard coming‑into‑force rules would apply once enacted. Data unavailable.

• Workers and commuters

  • Gasoline, diesel, and other fuels that include a separate federal or provincial carbon charge would no longer have GST/HST applied to that charge portion. Pump prices could fall by the GST/HST amount applied to the carbon charge line (Bill s.154(2.1)).

• Businesses

  • You would stop charging/remitting GST/HST on the carbon charge portion of invoices for fuels or services that list a GGPPA or provincial carbon levy (Bill s.154(2.1)).
  • Point‑of‑sale and billing systems would need updates to exclude carbon charge amounts from the GST/HST calculation base (Bill s.154(2.1)).
  • Trades of emission allowances would be zero‑rated. You would charge 0% GST/HST on those trades and continue to claim input tax credits on related inputs (Schedule VI, new Part XI).
  • Some prior collection/rebate provisions are repealed; check compliance processes once Canada Revenue Agency updates guidance (repeals s.221(2.1), s.261(2.1)).

• Provinces and municipalities

  • In HST provinces, the HST would not apply to the carbon levy portion either, since it is excluded from “consideration” for GST/HST purposes (Bill s.154(2.1)).
  • Provincial sales taxes outside the HST are not changed by this federal bill. Data unavailable on any provincial responses.

Expenses#

• Estimated net cost: Data unavailable.

• Key fiscal effects described in the bill text:

  • Reduces federal GST/HST revenue by excluding federal and provincial carbon levies from the GST/HST base (Bill s.154(2.1)).
  • Reduces HST amounts collected and later distributed to participating provinces on the carbon levy portion (Bill s.154(2.1)). Amount: Data unavailable.
  • Sets GST/HST at 0% on emission allowance trades, which may reduce net GST/HST receipts from that market while preserving input tax credits (Schedule VI, new Part XI). Amount: Data unavailable.
  • No appropriation or spending authority is included in the bill text.

• Fiscal note or official estimate: Data unavailable.

Proponents' View#

• Eliminates “tax on a tax.” Consumers and businesses would no longer pay GST/HST on top of federal GGPPA charges or provincial carbon levies (Bill s.154(2.1)(a)-(b)).
• Lowers bills modestly. Savings equal the applicable GST/HST rate applied to the carbon charge line, improving transparency on invoices and receipts (Bill s.154(2.1)).
• Supports carbon markets. Zero‑rating emission allowance trades avoids cascading tax and aligns tax treatment with other zero‑rated financial instruments, while allowing input tax credits (Schedule VI, new Part XI).
• Administrative clarity. By excluding these levies from “consideration,” suppliers have a clear rule for calculating GST/HST, reducing disputes about how to apply tax to carbon charges (Bill s.154(2.1)).
• Neutral to carbon policy. The bill does not alter carbon price levels or rebates set under other laws; it only changes sales tax treatment (Bill s.154(2.1); Schedule VI, new Part XI).

Opponents' View#

• Revenue loss without offsets. The bill narrows the GST/HST base and reduces federal and HST‑shared revenues; no replacement revenue is identified. Magnitude is not provided (Bill s.154(2.1)). Data unavailable.
• Unequal treatment. Other excise duties and fuel taxes are generally included in the GST/HST base; carving out carbon charges may create inconsistency across taxed products (Bill s.154(2.1)).
• Implementation burden. Fuel retailers, utilities, and invoicing platforms must reprogram systems to exclude carbon levies from the GST/HST base, with risk of errors during transition (Bill s.154(2.1)).
• Definition and scope risks. Disputes could arise over what counts as a “provincial levy imposed in respect of carbon,” especially in cap‑and‑trade or mixed regulatory schemes (Bill s.154(2.1)(b)).
• Market effects unclear. Zero‑rating emission allowances changes tax treatment of a specialized market; potential compliance and audit complexities may increase until guidance is issued (Schedule VI, new Part XI).