Canada’s cost-of-living squeeze continues to hit household budgets, especially at the grocery store. On January 26, 2026, Prime Minister Mark Carney unveiled a new set of federal measures designed to help Canadians cope with rising food and essentials costs — but not everyone agrees that the plan goes far enough.
What the Government Announced
Carney’s government introduced the Canada Groceries and Essentials Benefit, a revamped support program aimed at helping lower- and modest-income families manage food costs:
- Increase to GST/GST credit: The existing Goods and Services Tax (GST) credit — a quarterly benefit mailed to qualifying households to offset taxes paid — will be boosted by 25% over five years, starting in July 2026. (Reuters)
- One-time top-up payment: In spring 2026, a one-time payment equivalent to 50% of this year’s GST credit will be issued. (Canada)
- The government estimates that these enhancements will cost about C$3.1 billion in the first year and continue at roughly C$1.3–1.8 billion annually afterward. (Reuters)
- Additional funding is earmarked to support food sector investment, help small businesses, and strengthen community food programs. (Reuters)
According to government messaging, these measures aim to put more money back into the pockets of over 12 million Canadians struggling with grocery inflation — in some cases, hundreds of extra dollars annually.
Why Some Say This Isn’t Enough
Despite the government’s intent, critics argue the rebate approach treats a symptom of rising food prices rather than the root causes. Recent reports from hunger-focused organizations, for example, say the benefit may still fall short for households facing extreme food insecurity.
The fundamental issue here is that while rebates increase income after the fact, they don’t directly lower the price of food at the checkout — which is what most Canadians actually feel every week.
Calls for Cutting the GST on Food Instead
An alternative proposal gaining traction, particularly among some business groups and policy advocates, is to reduce or eliminate the GST on food and groceries: (CityNews Vancouver)
- Restaurants Canada and other industry voices have campaigned to permanently cut or suspend the GST on most food items — both in grocery stores and restaurants — to directly lower prices for consumers. (CityNews Vancouver)
- Proponents argue that a GST exemption on food would cut costs more effectively than a rebate because it reduces what consumers pay at the point of purchase rather than reimbursing them later. (CityNews Vancouver)
- They also claim that lowering taxes on essential goods could boost consumer spending, create jobs, and stimulate parts of the economy tied to food service and agriculture. (CityNews Vancouver)
This debate isn’t new. In past affordability discussions, political parties and policymakers have floated deeper GST rate cuts or exemptions for essentials as part of broader tax reform. A recent leadership platform even included proposals to reduce the GST to 4% or eliminate it on items like children’s clothing and necessities. Of course, with governments being addicted on large spending programs, requiring billions in annual revenue, it is not feasable to cut or lower GST; a much needed revenue source.
Rebate vs. Tax Cut: What’s the Difference?
The core difference between these approaches comes down to timing and impact:
| GST Credit Rebate | GST Cut/Exemption on Food |
|---|---|
| Sends money back after purchases | Reduces cost at the time of purchase |
| Targets low-income earners | Applies to anyone buying food |
| May not change behavior or pricing | Might force retailers to pass savings to consumers |
| Leaves prices unchanged | Cuts the tax portion of price directly |
For many Canadians juggling tighter budgets, seeing immediate savings at the grocery store can feel more real than waiting for a quarterly rebate check. But optics can’t be ignored here: a government giving people money directly looks far more tangible than reducing or cutting the GST. While the latter may be more beneficial in the long run, it is politically easier-and more visible-for a government to be seen “helping” by putting money directly into people’s pockets in the form of a cheque.
The Bottom Line
Canada’s new food affordability plan – expanding the GST credit into an enhanced Groceries and Essentials Benefit – represents a significant effort to help households cope with inflation-driven food costs. But it has sparked renewed debate about the best way to reduce grocery bills: direct tax cuts at the till versus rebates delivered later.