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Zero GST, 10% Credit for Efficient Products

Full Title: An Act to amend the Excise Tax Act and the Income Tax Act (extra-energy-efficient products)

Summary#

This bill would cut federal sales tax on certain high‑efficiency products and give buyers a personal income tax credit. It creates a new “extra‑energy‑efficient” designation set by regulation and applies it to listed product categories. Only products that beat existing federal efficiency standards by at least 10% and hold less than 50% of market share can qualify (Excise Tax Act s.125.1(1)(a)-(b)).

  • Sets GST/HST to 0% (zero‑rated) for designated products in listed categories like appliances, HVAC, lighting, electronics, and motors (Schedule VI, Part XI; Excise Tax Act).
  • Creates a personal income tax credit equal to 10% of purchase amounts, up to CAD $1,000 per person per year, for designated products (Income Tax Act, new provision after s.118.07, subsec. (2)).
  • Government sets and updates the qualifying product list by regulation, with review at least every 5 years (Excise Tax Act s.125.1(2); Income Tax Act subsec. (5)).
  • Designations must align, when possible, with recognized criteria used elsewhere (e.g., other jurisdictions or organizations) (Excise Tax Act s.125.1(1)(c)).

What it means for you#

  • Households

    • Pay 0% GST/HST at checkout on qualifying “extra‑energy‑efficient” products within the listed categories once regulations are in force (Schedule VI, Part XI).
    • May claim a 10% personal tax credit on what you paid for qualifying products, up to $1,000 per tax year. This credit reduces tax you owe; it is not a cash payment if you owe no tax (Income Tax Act subsec. (2)).
    • If more than one person claims the same item, the total credit for that item cannot exceed what one person could claim. If claimants cannot agree on shares, the Minister may set the portions (Income Tax Act subsec. (3)).
    • Timing: Benefits start only after the Governor in Council designates products by regulation. No date is set in the bill (Excise Tax Act s.125.1; Income Tax Act subsec. (4)).
  • Renters and Homeowners

    • Either can benefit if they personally buy a qualifying product. The tax credit applies to individuals; there is no business credit in the bill (Income Tax Act subsec. (2)).
  • Businesses and Non‑profits

    • 0% GST/HST applies at point of sale for qualifying products for all purchasers. Registered businesses that normally claim input tax credits may see little net change, but cash outlay at purchase is lower. Non‑registrants and entities that cannot recover GST/HST would not be charged tax on qualifying items (Schedule VI, Part XI).
    • No business income tax credit is created by the bill; the credit is only for individuals (Income Tax Act subsec. (2)).
  • Retailers and Manufacturers

    • Must identify and track which SKUs qualify under the regulations and apply 0% GST/HST at checkout for those items (Schedule VI, Part XI; Excise Tax Act s.125.1).
    • Designations must be reviewed at least every 5 years, and can change as market share and technology change. Point‑of‑sale systems and labels may need updates over time (Excise Tax Act s.125.1(2)).
  • What products can qualify (categories listed in the bill; specific models require designation)

    • Appliances: clothes washers/dryers, dishwashers, refrigerators/freezers, ranges, dehumidifiers, microwave ovens, ceiling fans (Schedule VI, Part XI).
    • Cooling/heating: air conditioners (room, central, packaged, portable), condensing units, chillers, heat pumps, furnaces, recovery ventilators, electric boilers, electric water heaters (Schedule VI, Part XI).
    • Lighting and electronics: lamps and ballasts, lighting fixtures, compact audio and video products, televisions, external power supplies, battery chargers (Schedule VI, Part XI).
    • Motors: electric motors and small electric motors (Schedule VI, Part XI).
    • To be designated, a product must beat the Energy Efficiency Regulations, 2016 by at least 10% and have ≤50% domestic market share; alignment with other criteria should be considered (Excise Tax Act s.125.1(1)).

Expenses#

Estimated net cost: Data unavailable.

  • No official fiscal note identified for this bill. Data unavailable.
  • Revenue effects would include:
    • Foregone GST/HST on designated products sold nationwide (Schedule VI, Part XI). Data unavailable.
    • Foregone personal income tax from the 10% credit, capped at $1,000 per individual per year (Income Tax Act subsec. (2)). Data unavailable.
  • Administration:
    • Costs to develop, implement, and review regulations at least every 5 years (Excise Tax Act s.125.1(2); Income Tax Act subsec. (5)). Data unavailable.

Proponents' View#

  • Lowers upfront prices and after‑tax cost of high‑efficiency products through 0% GST/HST and a 10% credit up to $1,000 per person per year, which they argue will increase uptake (Schedule VI, Part XI; Income Tax Act subsec. (2)).
  • Targets top‑tier efficiency by requiring products to beat federal standards by at least 10% and to have less than 50% market share, focusing support on leading models rather than the whole market (Excise Tax Act s.125.1(1)(a)-(b)).
  • Updates over time keep the bar high and respond to technology and market shifts via mandatory reviews at least every 5 years (Excise Tax Act s.125.1(2); Income Tax Act subsec. (5)).
  • Encourages consistency with recognized programs by directing harmonization with criteria used in other jurisdictions or organizations, which may ease consumer and retailer understanding (Excise Tax Act s.125.1(1)(c)).
  • Supports the bill’s stated goal to reduce energy use by shifting purchases toward more efficient products (Preamble). Data unavailable on expected energy savings.

Opponents' View#

  • Reduces federal tax revenue from both GST/HST and personal income tax; no published estimate is provided in the bill (Schedule VI, Part XI; Income Tax Act subsec. (2)). Data unavailable.
  • The credit appears non‑refundable because it is a deduction from tax payable; individuals with little or no tax owing may not benefit fully, raising equity concerns (Income Tax Act subsec. (2)).
  • May subsidize many purchases that would have occurred anyway (free‑rider effect), which can lower cost‑effectiveness. Data unavailable on additional uptake beyond baseline.
  • Administrative complexity: qualifying status can change with market share and periodic reviews, creating compliance burdens and potential confusion for retailers and consumers (Excise Tax Act s.125.1(1)-(2)).
  • Scope and definitions depend on future regulations; there is uncertainty about which models will qualify and when benefits start (Excise Tax Act s.125.1; Income Tax Act subsec. (4)).

Timeline

Feb 14, 2024 • House

First reading

Climate and Environment
Economics
Trade and Commerce