An exempt supply is a good or service on which no GST/HST is charged and for which the supplier cannot claim input tax credits, unlike a zero-rated supply.
Exempt supplies carry no GST/HST, but crucially the supplier cannot claim input tax credits on the costs of making them, so the tax paid on inputs becomes an unrecoverable cost. This is the key difference from zero-rated supplies, which are also tax-free to the customer but do allow input tax credits.
Common exempt supplies include most health and dental services, financial services, residential rent, and many educational services. Businesses making exempt supplies are effectively outside the GST/HST recovery system, which affects pricing and whether registration is even worthwhile.
A residential landlord's rent is an exempt supply: no HST is charged to tenants, but the landlord cannot recover the HST paid on maintenance and repairs, so that tax becomes a real cost of doing business.
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