HST for Daycare Centres: The Public Service Body Rebate Explained

For licensed daycare operators in Ontario, the HST system requires understanding a specific set of rules that apply to exempt services. Unlike most commercial businesses, daycares do not charge HST on their primary services but are still entitled to recover a significant portion of HST paid on expenses — through the Public Service Body Rebate.

Daycare services as exempt supplies

Under the Excise Tax Act, providing childcare services for periods of less than 24 hours to children 14 years of age and under is "exempt." Daycares do not charge HST to parents on childcare fees and generally do not register for a standard GST/HST account. They cannot claim standard Input Tax Credits.

The burden of unrecoverable HST

Operating a daycare requires significant expenditures: commercial rent, educational supplies, furniture, utilities, facility maintenance. All are subject to 13% HST in Ontario. For a standard business that HST is recovered through ITCs. For a daycare providing exempt supplies, the HST represents a sunk cost.

The Public Service Body Rebate

The Excise Tax Act extends the PSB Rebate to specific for-profit businesses that provide public services — including licensed daycares. If your daycare is licensed under the Child Care and Early Years Act, you are eligible regardless of whether you are for-profit or non-profit.

How much you recover

In Ontario, the PSB Rebate for qualifying facility operators allows recovery of:

• 82% of the provincial portion of HST (the 8% component)
• 0% of the federal portion of HST (the 5% GST component)

Recovering 82% of provincial tax paid on commercial rent represents a massive annual cash flow injection.

How to claim

Track HST paid on all eligible expenses throughout the year. Submit Form GST66 (Application for GST/HST Public Service Bodies' Rebate). The rebate can be claimed semi-annually or annually.