HST for Daycare Centres: The Public Service Body Rebate Explained

Most for-profit daycare operators believe they have no HST recovery options because their services are exempt. They’re wrong. A licensed daycare in Ontario - whether for-profit or non-profit - qualifies for the Public Service Body (PSB) Rebate. This allows you to recover a meaningful percentage of the HST paid on your operating expenses, effectively lowering your cost of business by thousands of dollars every year.

The starting point: Why childcare is exempt

Under the Excise Tax Act, providing childcare services to children 14 and under for periods of less than 24 hours is an exempt supply. This means:

1. 01Daycares do not charge 13% HST to parents.
2. 02Daycares generally do not register for a standard GST/HST account (unless they have other taxable revenue).

The catch: Because you are an exempt supplier, you cannot claim standard Input Tax Credits (ITCs) to get back the HST you pay on your own costs. Without the PSB rebate, the 13% tax on rent, utilities, and toys is a permanent expense.

The Public Service Body Rebate: The "Hidden" Recovery

The Excise Tax Act provides a specific rebate for designated PSBs - including licensed childcare facilities. This is a special category that bridges the gap between being "exempt" and being "fully taxed."

*Subject to 40% government funding threshold.

The math on a typical Ontario daycare (2026)

Let’s look at the actual cash impact for a mid-sized centre.

What’s required to claim

1. 01Licensing: The daycare must be licensed under Ontario’s Child Care and Early Years Act.
2. 02Exempt Activity: The expenses must be incurred to provide the exempt childcare services.
3. 03Form GST66: This is the specific application form for the rebate.
4. 04Documentation: You must maintain a ledger that separates the GST (federal) from the PST (provincial) components of the HST paid, as the rebate only applies to the provincial portion.

Filing frequency

When a daycare should also register for HST

A daycare that sells taxable items - like a separate catering service, a "night out" babysitting service for non-enrolled children, or taxable consulting - may have to register if those activities exceed the $30,000 small-supplier threshold.

In this scenario:

• You claim ITCs (100% recovery) on expenses used for the taxable side.
• You claim the PSB Rebate (82% of provincial portion) on expenses used for the daycare side.
• You must use a "reasonable method" to apportion shared costs like rent.

Every month of delay is a month of unrecovered cash. If you are a licensed operator in Ontario and haven’t seen "Rebate - GST66" on your bank statements, you are likely leaving $20,000+ on the table annually.