GST/HST confuses more Canadian small business owners than any other CRA obligation, and it’s usually because of one misunderstanding: the tax you charge was never your revenue. You collect it on behalf of the government, hold it, and hand it over. Businesses that spend it are the ones that end up in trouble.
Here’s how registration, filing and input tax credits actually work.
When you must register
You are required to register for GST/HST once you stop being a small supplier. You lose small supplier status when your total worldwide taxable revenues exceed $30,000, measured either:
- in a single calendar quarter, or
- over the previous four consecutive calendar quarters.
The timing differs depending on which way you cross it. Exceed $30,000 in one quarter and you are registered as of that supply, with registration required within 29 days. Cross it cumulatively over four quarters and you get a short grace period before the requirement kicks in.
Two important exceptions: taxi and ride-share drivers must register from their first fare regardless of revenue, and certain non-resident businesses have their own rules.
The threshold is measured on revenue, not profit. A business that grossed $40,000 and netted $12,000 is over the line.
Voluntary registration
You can register before you hit the threshold, and for many businesses it’s worth it. Registering lets you claim input tax credits on the GST/HST you pay on business purchases — which matters most in the startup phase when you’re buying equipment, paying for setup, and spending more than you’re earning.
The trade-off is that you must charge tax on your sales, which can make you slightly more expensive to individual consumers. If your customers are other registered businesses, they claim it back and don’t care. If you sell to the public, it’s a real price consideration.
What rate do you charge?
You charge based on where the customer is, not where you are — these are the place-of-supply rules.
| Province | Rate applied |
|---|---|
| Alberta, BC, Manitoba, Saskatchewan, territories | 5% GST (plus separate PST where applicable) |
| Ontario | 13% HST |
| New Brunswick, Newfoundland and Labrador, Nova Scotia, PEI | 15% HST |
| Quebec | 5% GST plus QST administered by Revenu Québec |
A Winnipeg business selling to an Ontario client charges HST at the Ontario rate, not 5%. Getting this wrong across a year of invoices creates a painful correction. Rates are occasionally revised, so verify current provincial rates before setting up your invoicing.
Filing frequency and deadlines
The CRA assigns a frequency based on your annual taxable supplies, and you can elect to file more often than required.
- Annual — generally for smaller registrants. Corporations file and pay three months after fiscal year-end. A self-employed individual with a December 31 year-end files by June 15 and pays by April 30.
- Quarterly — return and payment due one month after the reporting period ends.
- Monthly — same one-month rule, required for larger registrants.
Annual filers above a certain threshold also make quarterly instalments during the year. Full deadline detail sits in our small business tax deadlines guide.
Nil returns are still returns. If you had no sales in the period, you still file. Skipping it is a late filing.
Input tax credits
ITCs are how you recover the GST/HST you paid on business expenses. You remit the difference between tax collected and tax paid.
Collect $8,000 in GST/HST, pay $3,000 on business purchases, and you remit $5,000. In a quarter where you bought a lot of equipment, ITCs can exceed what you collected — and the CRA refunds you.
To claim ITCs you need proper documentation: supplier invoices showing the supplier’s GST/HST number, the date, the amount of tax, and a description of what was supplied. A credit card statement line is not sufficient support if the CRA reviews your claim. Expenses must be for commercial activity, and personal-use portions must be excluded. Meals and entertainment are generally limited to 50%.
The Quick Method
Small registrants under a revenue threshold can elect the Quick Method, remitting a fixed percentage of GST/HST-included sales instead of tracking every ITC. It’s simpler and often results in remitting less — but you give up most ITC claims, so it suits service businesses with low expenses far better than businesses buying a lot of inputs. Run the comparison before electing.
The habit that prevents most problems
Move the tax you collect into a separate account the moment it lands. Businesses that treat GST/HST as cash flow are the ones filing a return with nothing available to pay it.
Beyond that, it comes down to whether your books track sales tax correctly all year. If you’re deciding who should handle this, read Do I Need a Bookkeeper or an Accountant? and How Much Does a Bookkeeper Cost in Canada?
EverBooks sets up sales tax properly and files on time for businesses across Canada. See our bookkeeping and tax preparation services, or book a free consultation.
