Remove GST/HST from Carbon Levies

Summary#

This bill amends the federal Excise Tax Act to stop applying the GST/HST on top of carbon pollution pricing. It also makes trades of emission allowances zero‑rated (taxed at 0% for GST/HST). The bill does not change carbon prices themselves; it changes how sales tax applies to them. It takes effect 45 days after Royal Assent (Coming into Force).

• Removes GST/HST from the federal fuel charge under the Greenhouse Gas Pollution Pricing Act (GGPPA) (Bill s.154(2.1)(a)).
• Removes GST/HST from any provincial carbon levy (e.g., a provincial carbon tax) when included in a price (Bill s.154(2.1)(b)).
• Zero‑rates supplies of emission allowances (Bill Schedule VI, Part XI).
• Makes related technical changes to collection, self‑assessment, rebates, and assessment periods to align with the above (Bill amending ss.221, 228, 261, 298).
• Comes into force on the 45th day after Royal Assent.

What it means for you#

• Households and drivers

  • You would no longer pay GST/HST on the carbon charge portion of fuel and heating bills. The carbon charge still applies; only the sales tax on that portion is removed (Bill s.154(2.1)).
  • Example: If the federal fuel charge on gasoline is 17.61¢/L (as of April 1, 2024), removing GST at 5% takes about 0.88¢/L off the total price; removing HST at 15% takes about 2.64¢/L off (ECCC fuel charge rates, April 1, 2024).
  • The same rule applies to provincial carbon levies (e.g., a provincial carbon tax listed on your bill); GST/HST would not apply to that levy line (Bill s.154(2.1)(b)).

• Small businesses and farms

  • Fuel, natural gas, and propane invoices would no longer include GST/HST on the carbon levy line. Your total GST/HST on those purchases would drop by the tax rate applied to the levy portion (Bill s.154(2.1)).
  • Point‑of‑sale and billing systems must be updated to exclude carbon levies from the GST/HST base within 45 days after Royal Assent.

• Large emitters and entities that trade compliance units

  • Buying or selling emission allowances would be zero‑rated (0% GST/HST). Buyers would not pay GST/HST on the allowance price; sellers could still claim input tax credits on related costs (Bill Schedule VI, Part XI).
  • This applies to “a supply of emission allowances.” The bill does not define that term; how it applies to specific units (e.g., cap‑and‑trade allowances, performance credits) would depend on Canada Revenue Agency (CRA) interpretation and guidance (Bill Schedule VI, Part XI).

• Provinces and HST‑participating jurisdictions

  • In HST provinces, both the federal and provincial components of HST would not apply to the carbon levy portion because the change applies to Part IX (GST/HST) of the Act (Bill s.154(2.1)). Provincial carbon levies still apply; only HST on those levies is removed.

• Timeline

  • Change takes effect on the 45th day after Royal Assent. Retailers, utilities, and fuel distributors must reconfigure invoicing by that date (Coming into Force).

Expenses#

Estimated net cost: Data unavailable.

• No federal fiscal note or Parliamentary Budget Officer estimate is publicly available. The bill is expected to reduce federal GST/HST revenues by removing tax on the carbon levy portion of transactions and by zero‑rating emission allowance trades. In HST provinces, the provincial HST share would also fall on the levy portion because the change applies under Part IX (GST/HST) (Bill s.154(2.1); Schedule VI, Part XI).
• Illustrative per‑unit impacts (for the sales tax removed from the levy portion only; underlying carbon charges unchanged):

• Aggregate revenue effects for the federal government and HST provinces: Data unavailable.

Proponents' View#

• It removes “tax on a tax” by excluding carbon levies from the GST/HST base, making invoices clearer and slightly lowering bills (Bill s.154(2.1)).
• It reduces costs for families and small businesses that buy fuel and home heating, with a reduction equal to the GST/HST rate applied to the levy line (Bill s.154(2.1)).
• It aligns tax treatment with policy intent by not applying sales tax to regulatory charges aimed at pollution pricing (Bill s.154(2.1)).
• Zero‑rating emission allowances avoids adding sales tax to compliance costs for regulated emitters, while preserving input tax credits, which can lower overall compliance costs (Bill Schedule VI, Part XI).
• The 45‑day delay gives industry a short, defined window to update systems (Coming into Force).

Opponents' View#

• It reduces federal GST/HST revenue and, in HST provinces, the provincial share on the levy portion, without an official estimate of the fiscal impact (Data unavailable; Bill s.154(2.1)).
• It weakens the carbon price signal at the margin by 5%–15% of the levy, which could slightly reduce incentives to cut emissions (ECCC fuel charge rates; Bill s.154(2.1)).
• Implementation within 45 days may strain retailers’ and utilities’ billing systems and could cause invoicing errors or compliance disputes during the transition (Coming into Force).
• The bill does not define “emission allowances.” Without CRA guidance, coverage of specific instruments (e.g., cap‑and‑trade units, performance credits) may be unclear, creating administrative risk (Bill Schedule VI, Part XI).
• Technical repeals and amendments (ss.221, 228, 261, 298) could have unintended effects on existing rebate or assessment rules if cross‑references are missed or misapplied; details are not explained in the bill summary (Bill text).