What is GST / HST?
GST (Goods and Services Tax) is a 5% federal tax on most goods and services supplied in Canada. In participating provinces, GST is combined with the provincial sales tax into the Harmonized Sales Tax (HST): Ontario 13%, New Brunswick, Nova Scotia, Newfoundland and Labrador, and PEI 15%. Businesses must register once taxable sales exceed CAD 30,000.
Current Rate (Reporting periods: monthly, quarterly, or annual depending on revenue)
GST: 5%. HST: Ontario 13%, Atlantic provinces 15%. Quebec charges QST 9.975% alongside 5% GST.
Example
A Toronto graphic designer earns CAD 85,000 in fees and must charge 13% HST (Ontario) on all taxable supplies. She collects CAD 11,050 in HST, claims input tax credits on her business purchases, and remits the net amount to CRA each quarter.
How GST / HST works in Canada
GST and HST are consumption taxes that apply to most supplies of goods and services made in Canada. Understanding the registration requirement, the difference between zero-rated and exempt supplies, and the input tax credit mechanism is essential for any Canadian business owner.
**Registration threshold**
A business must register for GST/HST when its total taxable revenues in any single calendar quarter, or in the last four consecutive calendar quarters, exceed the small supplier threshold of CAD 30,000. Once threshold is met, registration is required within 29 days. Small suppliers may register voluntarily before reaching the threshold, which allows them to claim input tax credits (ITCs) on their purchases. Most businesses benefit from early registration.
**Zero-rated vs. exempt supplies**
Zero-rated supplies are technically taxable (rate is 0%), which means the supplier does not charge GST/HST on the sale but can still claim ITCs on related purchases. Examples include: basic groceries, exports of goods and services, most prescription drugs, agricultural products, and most international transportation. Exempt supplies are not taxable at all, and suppliers cannot claim ITCs on related purchases. Examples include: most health care services, educational services (tuition), financial services, and certain real property transactions.
**Input tax credits (ITCs)**
Registered businesses can recover the GST/HST paid on business inputs by claiming ITCs on their GST/HST return. ITCs must be claimed within four years of the relevant reporting period (two years for most large businesses). Proper documentation (supplier name, GST/HST number, invoice date, amount) is required for each ITC claim.
**Quick Method**
CCPCs and other small businesses with annual taxable revenues below CAD 400,000 can elect the Quick Method of accounting for GST/HST. Under the Quick Method, the business remits a flat percentage of its taxable sales (ranging from 1% to 8.8% depending on type of supply and province) instead of calculating actual ITCs. This reduces the administrative burden significantly and often results in keeping more of the GST/HST collected.
**Place-of-supply rules**
The rate of GST/HST depends on where the supply is made, not where the supplier is located. For services, the province where the customer is located generally determines the applicable rate. Businesses that operate across multiple provinces must track the province of supply for each transaction and charge the correct rate.
**Filing and remittance**
GST/HST returns and remittances are due one month after the end of the reporting period for monthly filers, one month after the end of the fiscal quarter for quarterly filers, and three months after the fiscal year-end for annual filers. Annual filers with net tax owing above CAD 3,000 must make quarterly instalment payments.
Related terms
A Business Number is a unique 9-digit identifier issued by the Canada Revenue Agency to identify a business or legal entity. The BN is the root identifier to which CRA program accounts are added: RC (corporation income tax), RT (GST/HST), RP (payroll deductions), and RM (import/export). All CRA business filings and remittances use the BN and program account suffix.
The T2 is the annual corporate income tax return filed with the Canada Revenue Agency by all Canadian resident corporations and certain non-resident corporations with a taxable presence in Canada. The return is due within 6 months of the corporation's fiscal year-end. The balance of corporate tax owing is due 2 months after year-end (3 months for eligible CCPCs).
The Small Business Deduction reduces the federal corporate tax rate from 15% to 9% for Canadian-Controlled Private Corporations on the first CAD 500,000 of active business income per year. The deduction is subject to reduction for associated corporations, passive investment income, and taxable capital above CAD 10 million.
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