First Nations Goods and Services Tax (FNGST)

The FNGST is implemented through a First Nations’ tax jurisdiction, which can be established under agreements such as the First Nations Goods and Services Tax Act, SC 2003, c 15, s 67 (FNGST Act) or through a comprehensive land claims agreement or self-government agreement. Here’s how it generally works:

1. Tax Jurisdiction: A First Nation must pass a law that authorizes them to impose a goods and services tax. The tax can apply to both on-reserve and off-reserve transactions, depending on the community’s decision and legal framework.
2. Tax Rate: Like the GST, the FNGST is typically set at a percentage rate of the sale price. The tax rate varies depending on the First Nation’s decision, though it is often aligned with or similar to the federal GST rate, which is 5%.
3. Tax Exemptions: First Nations can also apply exemptions to the FNGST, just as the GST has exemptions for certain types of goods and services. For example, basic necessities like groceries and health services may be exempt from the FNGST.
4. Administration and Collection: The First Nation is responsible for the administration and collection of the tax. They may either collect the tax themselves or enter into an agreement with the Canada Revenue Agency (CRA) to collect the tax on their behalf. Some First Nations choose to handle tax collection internally to retain more control over their financial systems.
5. Revenue Use: Revenue generated from the FNGST can be used by the First Nation for a variety of purposes. These include infrastructure development, public services like education and healthcare, economic development programs, and more. The flexibility to use the revenue in ways that best meet the community’s needs is a critical benefit of this tax system.