On January 26, the federal government introduced the Canada Groceries and Essentials Benefit, which consisted of a one time payment for GST credit recipients and a further ongoing top up to the credit. This “new” benefit is actually the existing GST credit, just renamed and with some increases. While “groceries” is the name of the rebrand, there is no requirement that this cash transfer be spent on groceries, or anything in particular. As before, it is money that simply appears in Canadians’ bank accounts to spend on whatever they need.
The GST credit is a benefit targeted at low-income families, who will benefit the most from the change, but first let us take a look at how it impacts all families, then look at low-income families
Canadians are justifiably concerned with grocery prices, but this improvement in the GST credit does not address that problem specifically. Grocery prices will continue to increase at the (or above) the inflation rate, they won’t decline. What the benefit does is help lower- and lower-middle income families afford those higher prices.
The GST credit was meant to offset the fact that low income households have to pay GST, and they probably can’t afford to. The federal government pays that credit (now named the CGEB) in four installments direct to bank accounts. The first two in 2026 will remain unchanged, and then sometime before June, the federal government will make a one-time ad-hoc payment worth 50 per cent of the annual GST credit amount. For the last two payments in 2026, the feds will boost them by 25 per cent each. That 25 per cent boost will continue for the next five years.
So in 2026, the GST credit will be boosted by 62.5 per cent overall, if we include the 50 per cent lump sum before June and the two increases of 25 per cent—and then by a flat 25 per cent for the next five years.
We can use Statistics Canada’s The Social Policy Simulation Database and Model (SPSD/M) version 30.3 to simulate some of the impacts of these changes in the 2026 calendar year.
Figure 1 examines what proportion of families would benefit from the 2026 improvements in the GST credit, which is targeted to lower income families and then tapers off as income rises. The credit is also proportional to the number of people in the family, so families with more children receive more support. The benefit any specific family would see from the change is going to be very specific to their circumstances. If a family receives the GST credit already, they’ll definitely see a benefit. Here are the example tables.
What is generally clear though is that the income targeting means that the bottom 40 per cent of families will almost universally see some benefit from these changes. The top 60 per cent of families may see some benefit, but it’s much less likely. Only 20 to 30 per cent of families making over a pre-tax family income over $65,000 are likely to see any benefit.
In the aggregate, 53 per cent of families will see at least some benefit from this change, so the benefits will be quite widespread.
The government backgrounder cites a benefit for a family of $805 more from June 2026 to June 2027. That is certainly possible, but it picks the period whereby the benefit is the highest due to this year’s the 50 per cent lump sum. If we stick to calendar years, in 2026 the maximum benefit from these changes for a family of four is actually $678.75, with that amount growing for larger families and shrinking for smaller ones. Across all families that benefit, the average boost is $403 per family in 2026.
Because this change is focused on lower incomes, it should lift 172,000 people above the Market Basket Measure (MBM) poverty line in 2026, as shown in Figure 2. Most of those lifted out of poverty would be adults (about 95,000) but the children in those families would also benefit and 43,000 children would be lifted out of poverty as would 34,000 seniors.
Unfortunately as 2027 support will be lower, at a 25 per cent boost instead of 62.5 per cent in 2026, poverty in these groups will climb back up.
Provincial Matching
Should feds be the only ones trying to offset the higher costs Canadians are facing?
In the past, the provinces have matched federal policy changes on sales taxes. When there was the GST Holiday from December 2024 to February 2025, many of the provinces matched the feds with their own HST or PST holidays for the same period.
The provinces can and should do the same with the GST credit boost.
All of the provinces, save Manitoba and Alberta, have their own sales tax credits for their part of the HST or their PST. Alberta doesn’t have a sales tax, and hence no credit. Manitoba does a sales tax but has no credit for lower income families. Manitoba’s PST is seven per cent which is slightly higher than Saskatchewan’s at six per cent and the same as BC at seven per cent, both of which have sales tax credits for lower income households.
Just like the GST credit changes, we can use Statcan’s SPSD/M to simulate what impacts the provinces boosting their own credits would have. In this scenario, we’ll boost the provincial sales tax credit amounts by 75 per cent in 2026 (50 per cent one time boost + 25 per cent ongoing). As with the federal version, we’ll increment up the benefit levels by 75 per cent but keep the clawback rates and turndown levels the same. As Alberta and Manitoba have no such credits, their families would see no change in transfers.
The provincial sales tax credits all operate separately from the GST credit and from each other, they all have different benefit levels and apply to different income levels. In the provincial simulations below, we’re improving the basic amount by 75 per cent, but leaving the other clawback rates and income turndown levels unchanged.
The BC credit is particularly miserly compared to the other provinces, providing an average benefit of $61 in 2026 for those lucky enough to receive anything. The system has no additional amounts for children, unlike every other system. PEI also has a particularly small credit which would amount to an average gain for families of just over $100 for those that see any benefit.
Families in most provinces could see a roughly $400 boost from improvements in their province’s PST credit.
Fewer families receive provincial sales tax credits as they tend to be more focused on lower income families compared to the GST credit. While the federal GST credit boost would see 53 per cent of families getting at least some benefit, the provincial credit boost would only go to between 20 and 30 per cent of families. Although that proportion is much lower in BC at only eight per cent.
Manitoba has no sales tax credit but charges a sales tax. If it were to adopt Saskatchewan’s sales tax credit, which has a similar geography and sales tax rate, there could be a significant benefit.
If Manitoba were to adopt the Saskatchewan Low-Income Tax Credit (SLITC), the average benefit (for those that saw a benefit) in Manitoba would be $576 a family in 2026. That’s before improving it by 75 per cent, as we’re doing with the other provincial credits. Just over a quarter of Manitoban families would see some benefit from an imported Saskatchewan credit. It would also lift 8,000 families in Manitoba out of poverty.
The impact of improving provincial sales tax credits is similar to improving the federal GST credit, families near the poverty line would be lifted above it. If both the GST credit and provincial PST equivalents were boosted there would be a combined effect on poverty rates and average gain (again assuming nothing provincial happens in Manitoba or Alberta).
On average, families who saw a gain would receive almost $700 more across both federal and provincial changes. The proportion of families seeing a benefit from either the federal or provincial changes (but most likely both) would go up to 57 per cent of families.
The impact on poverty rates improves if the provinces pitch in. With both levels of government working together, we’d see a quarter million people lifted out of poverty, as defined by the MBM. This would include roughly 137,000 adults, 63,000 children and 44,000 seniors.
Affordability is not just a federal responsibility
Affordability and poverty reduction aren’t just a federal responsibility, they’re also a provincial one.
The federal government’s change to an existing mechanism will have a rapid effect on lower income families and those living in poverty. More targeted and effective income transfers are proposed in our Alternative Federal Budget and Nova Scotia alternative budget. We should be implementing these more thorough mechanics with these sales tax boosts acting as a bridge.
The provinces can and should be matching this federal effort to help lower income households afford the basics while reducing poverty rates.
