Federal Budget 2026: Sales tax and excise measures

Health care services and products 

Budget 2026 makes changes to the GST/HST status of certain health care service and devices: 

• Registered massage therapy: Services will be exempt from GST/HST provided the practitioner meets the provincial licensing or equivalency requirements. As a result, massage therapists will no longer be eligible to claim input tax credits in respect of any expenditures acquired to provide their services.  This change is effective after November 5, 2026. 
• Alternating electric field therapy devices: Certain electrical devices designed for the treatment of cancers will be zero-rated once approved by Health Canada after November 5, 2026.  

Financial institutions

Financial institutions are now able to have the CRA pre-approve their ITC allocation methods for up to three years (extended from one year). This measure could provide some much-needed certainty and efficiency. It applies to fiscal years beginning after June 30, 2027.     

Federal Fuel Excise Tax Licensing Framework 

The budget recommends changes for the licensing of fuel wholesalers to better reflect current wholesaling practices and to modernize a process that has often allowed tax to apply more than once in the supply chain. Budget 2026 proposes a time-limited payment mechanism for entities that might have been subject to tax twice on the same quantity of fuel. This measure expands the licensing framework for fuel wholesalers who are in the business of selling fuel to other licensed wholesalers, manufacturers or entities that will be reselling the fuel in the normal course of their business. These measures are to come into force the day after royal assent. 

Cannabis taxation 

Budget 2026 provides cannabis producers the option of participating in a common duty-stamping regime. This simplified process will apply to all provinces and territories that currently apply the same duty rate. The new process also comes with greater penalties for violations. Provinces and territories have until January 31, 2027 to decide whether to join the common-stamping regime. The more provinces and territories that sign onto the same duty rate and the common duty-stamping regime, the less barriers to cross-country distribution for licensed cannabis producers. The budget also introduces a new penalty equal to twice the duty value of unaccounted cannabis inventory. In addition, revisions to the calculation of certain existing fines and penalties are included. For example, one charge varies with the THC content of the product and could reach two to three times the duty value. 

Security for warehouses storing alcohol  

The budget requires excise warehouse licencees to provide security as a condition of their licensing, similar to security requirements for GST/HST-registered non-residents. The security will range from a minimum of $5,000 to a maximum of $2 million, for each licence.

Indigenous tax 

The budget increases the First Nations personal income tax revenue sharing rate to 99% (from 95%) of the participating government’s revenues. It also limits the Indigenous government’s cost under the Canada Groceries and Essentials Benefit of the First Nations Goods and Services Tax arrangements. The federal government also noted that it intends to enter negotiations with interested Indigenous governments to implement these enhancements.   

Customs    

• Budget 2026 proposes to update outdated codes within the Harmonized Commodity Description and Coding System (harmonized system (HS)): the standardized method for identifying and classifying imported goods. In many cases, this measure broadens the tax relief on imported goods. These updates will result in consequential changes to the Non-Taxable Imported Goods (GST/HST) Regulations, the Value of Imported Goods (GST/HST) Regulations and replace the references to the outdated Temporary Importations (Excise Levies and Additional Duties) Regulations, which could preserve existing tax relief for qualified interprovincial movement of goods.  
• The budget updates the definition of “specified motor vehicle” to exclude electric cycles requiring pedal propulsion, wheelchairs, and pedestrian-moved vehicles. 
• Tax relief is being expanded for international cargo containers that are temporarily imported into Canada. The minimum size of eligible containers has been lowered to one cubic meter (from 14 cubic meters), and the export timeline has been extended to one year (from 30 days).  
• The budget also extends or makes changes to relief for specific goods including equipment used to repair or maintain international bridges, international railway locomotives, railway rolling stock, and related equipment, books from free lending libraries, as well as side shows or concessions related to imported live entertainment events and amusement rides.