How does HST work on construction services and materials in Ontario?

Construction services in Ontario are taxable supplies, so contractors charge 13% HST on both labour and materials included in their invoices. The party paying for construction — the homeowner, the developer, or the commercial client — pays HST on the total invoice.

From the contractor's side, HST paid on materials purchased for the job, subcontractor fees, equipment rentals, and other taxable inputs are all ITC-eligible, reducing the contractor's net HST remittance. The HST system is designed so that tax accumulates at the final consumer stage rather than cascading through each supply chain layer.

For homeowners paying for renovations (who are not HST-registered and cannot claim ITCs), the HST is simply an additional cost. For businesses renovating commercial premises, the HST on construction costs is generally an ITC. New residential construction has additional complexity around builder self-supply rules and the new housing rebate.

One practical note: subcontractors working for a general contractor should still charge HST on their services (once they are registered), and the general contractor claims that HST back as an ITC. Failing to do this correctly — e.g., a subcontractor not charging HST and a GC not being able to claim the ITC — is a common source of errors in the construction industry.