The GST, which is administered by Canada Revenue Agency (CRA), replaced a previous hidden 13.5% manufacturers' sales tax (MST).
Businesses that purchase goods and services that are consumed, used or supplied in the course of their "commercial activities" can claim "input tax credits" subject to prescribed documentation requirements (i.e., when they remit to the Canada Revenue Agency the GST they have collected in any given period of time, they are allowed to deduct the amount of GST they paid during that period).
At that time, every province in Canada except Alberta already had its own provincial sales tax imposed at the retail level.
Mulroney claimed the GST was implemented because the MST was hindering the manufacturing sector's ability to export competitively.
Although the GST was promoted as revenue-neutral in relation to the MST, a large proportion of the Canadian population disapproved of the tax.
During the election campaign, Chrétien promised to repeal the GST, which the Liberals had denounced while they were the Official Opposition, and replace it with a different tax.
However, only three Atlantic provinces (Nova Scotia, New Brunswick and Newfoundland and Labrador) agreed to go along with this plan, joined by British Columbia and Ontario in 2010, and Prince Edward Island in 2013.
Heritage Minister Sheila Copps, who had personally promised to oppose the tax, resigned and sought re-election.
Ontario and British Columbia both harmonized the GST with their provincial sales tax (PST) effective July 1, 2010.
However, the British Columbia HST was defeated in an August 2011 mail-in referendum by a 55% majority vote,[5] and was converted to the old GST/PST system effective April 1, 2013.
Although the Government of Ontario has made efforts to provide documentation as to what items are affected and how, this causes some confusion for consumers as they are often not sure what taxes to expect at the checkout.
[7] Only three provinces (British Columbia, Manitoba, and Saskatchewan) continue to impose a separate sales tax at the retail level only.
[9] Stephen Harper's Conservatives won that election and formed a minority government on February 6, 2006.
[16] The provinces have chosen not to require prices to include the GST, similar to their provincial sales taxes.