GST/HST: The Basics Every Canadian Business Owner Must Know
The Goods and Services Tax (GST) and Harmonized Sales Tax (HST) apply to most goods and services sold in Canada. As a business owner, you're responsible for collecting this tax from your customers and remitting it to the Canada Revenue Agency (CRA). Get it wrong, and you face interest charges, penalties, and potential audits.
This guide covers everything — registration thresholds, provincial rates, what's taxable, input tax credits, filing frequency, and what to do if you've fallen behind.
When Do You Need to Register for GST/HST?
You must register when your worldwide taxable revenues exceed $30,000 in any single calendar quarter or in four consecutive calendar quarters. This $30,000 threshold is called the "Small Supplier" threshold.
The moment you cross this threshold, you're legally required to register — and you begin owing GST/HST on all taxable supplies from that point forward.
Voluntary registration: You can register before reaching $30,000, and in many cases you should. If you have significant business expenses with GST/HST on them (software, equipment, rent, professional fees), voluntary registration lets you claim Input Tax Credits (ITCs) on those costs immediately — often recovering thousands per year.
GST vs. HST vs. QST: Rate Guide by Province
| Province | Rate | Type | |---|---|---| | Alberta | 5% | GST only | | British Columbia | 5% + 7% PST | GST + separate PST | | Manitoba | 5% + 7% RST | GST + separate RST | | Saskatchewan | 5% + 6% PST | GST + separate PST | | Ontario | 13% | HST (blended) | | Nova Scotia | 15% | HST (blended) | | New Brunswick | 15% | HST (blended) | | PEI | 15% | HST (blended) | | Newfoundland & Labrador | 15% | HST (blended) | | Quebec | 5% + 9.975% QST | GST + separate QST | | Yukon / NWT / Nunavut | 5% | GST only |
The rate you charge depends on the province where your customer receives the supply — not where you're located.
What's Taxable, Zero-Rated, and Exempt?
Not everything is subject to GST/HST. There are three categories:
Taxable supplies (you charge GST/HST, you claim ITCs):
- Most goods sold in Canada
- Professional services (consulting, legal, accounting)
- Software and digital services
- Construction and trade services
Zero-rated supplies (0% GST/HST, but you still claim ITCs):
- Basic groceries (not restaurant food)
- Prescription drugs
- Most exports of goods and services to non-residents
Exempt supplies (no GST/HST, you cannot claim ITCs):
- Residential rent
- Medical and dental services
- Child care
- Financial services
- Insurance premiums
Understanding your supply category is critical — if you have a mix of taxable and exempt supplies, your ITC claims must be apportioned.
Input Tax Credits (ITCs): Your Most Valuable Tool
ITCs allow you to recover the GST/HST you paid on business expenses. This is one of the most financially significant aspects of GST/HST registration.
Examples of ITC-eligible expenses:
- Office rent (if HST province)
- Software subscriptions (Xero, QuickBooks, Google Workspace)
- Professional fees (bookkeeping, legal, accounting)
- Equipment purchases
- Marketing and advertising
- Business travel
To claim ITCs, you need valid invoices that include:
- Vendor's GST/HST registration number
- Your business name or trading name
- Invoice date
- Description of goods/services
- Total GST/HST amount charged
Missing a registration number on an invoice can cost you the ITC — so document carefully.
CRA Filing Frequency
CRA assigns your filing frequency based on your annual taxable revenues:
| Annual Revenue | Filing Frequency | |---|---| | Under $1.5 million | Annual | | $1.5M – $6 million | Quarterly | | Over $6 million | Monthly |
You can request a more frequent filing period if you typically receive a refund (useful for businesses with high expenses and lower revenue, such as startups investing heavily).
Common GST/HST Mistakes Small Businesses Make
1. Not registering on time The clock starts when you first cross $30,000, not when you realize you should have registered. Back-filing and paying interest on uncollected GST/HST is expensive.
2. Charging the wrong provincial rate The rate depends on where your customer is located, not you. Especially important for businesses selling nationally or to cross-border customers.
3. Missing ITC claims Poorly organized receipts and invoices mean missed ITCs. A bookkeeper who reconciles your GST/HST account monthly ensures every eligible dollar is captured.
4. Mixing GST/HST collected with operating funds Set aside GST/HST collected in a separate account or sub-account. It's not your money — it belongs to CRA.
5. Filing late CRA charges compound daily interest on late remittances, plus a 10–50% penalty for repeated late filers. Set calendar reminders or have your bookkeeper track deadlines.
If You've Missed Filing Periods
CRA's Voluntary Disclosure Program (VDP) allows businesses that have not filed or have filed incorrectly to come forward, pay what's owed, and potentially have some or all penalties waived. It's always better to come forward than to be found.
How North Ledger Handles Your GST/HST
Every client engagement at North Ledger includes GST/HST reconciliation as a core monthly task:
- We track your GST/HST collected and paid every month
- We reconcile your GST/HST payable account to your actual bank records
- We prepare your quarterly or annual returns
- We coordinate filing with your CPA or file directly where authorized
- We flag any months where your input tax credits look unusually high or low
For clients with both Canadian GST/HST and US sales tax obligations, we coordinate both simultaneously — a common situation for Canadian e-commerce businesses.
Schedule a consultation to review your GST/HST setup.
Further Reading
- US Sales Tax for Canadian Businesses Selling to American Customers: If you sell to US customers, you may have additional sales tax obligations post-Wayfair — entirely separate from GST/HST.
- Year-End Bookkeeping Checklist for Canadian Small Businesses: GST/HST reconciliation is one of the most critical steps in your December year-end close.
- Bookkeeping for E-Commerce Businesses: E-commerce sellers face both Canadian GST/HST and US state sales tax — here's how to manage both simultaneously.
