GST and HST in Canada: A Practical Guide for Small Business Owners
If you're operating a business in Canada, understanding GST and HST isn't optional — it's a legal requirement. Registering at the wrong time, charging the wrong rate, or failing to remit correctly can result in penalties from the Canada Revenue Agency. But the rules are learnable, and once you understand them, GST/HST compliance becomes routine.
This guide covers what GST and HST are, who needs to register, how to charge and remit, and what input tax credits mean for your cash flow.
What Are GST and HST?
GST (Goods and Services Tax) is a 5% federal tax applied to most goods and services sold in Canada. It's charged by businesses and remitted to the Canada Revenue Agency (CRA).
HST (Harmonized Sales Tax) combines the federal GST with provincial sales taxes into a single rate. The HST applies in provinces that have harmonized their provincial sales tax with the GST:
| Province | HST Rate | GST component | Provincial component |
|---|---|---|---|
| Ontario | 13% | 5% | 8% |
| New Brunswick | 15% | 5% | 10% |
| Nova Scotia | 15% | 5% | 10% |
| Prince Edward Island | 15% | 5% | 10% |
| Newfoundland and Labrador | 15% | 5% | 10% |
The remaining provinces (BC, Alberta, Saskatchewan, Manitoba, Quebec) use a separate provincial sales tax (PST) in addition to the federal GST — these are sometimes called "GST+PST provinces."
Quebec collects GST via Revenu Québec and has its own QST (Quebec Sales Tax) at 9.975%, applied on top of GST.
Who Must Register for GST/HST
Mandatory Registration
You must register for GST/HST if:
- Your worldwide annual taxable supplies exceed $30,000 in any rolling 12-month period, or in four consecutive calendar quarters
- You have a physical presence (employees, office, warehouse) in an HST province and make taxable supplies there
- You are a professional, sole proprietor, or corporation whose services are regularly supplied across provinces
Voluntary Registration
You can voluntarily register even if you're below the $30,000 threshold. This is common for: - Businesses that want to claim input tax credits (see below) - Contractors working with GST-registered businesses who want to pass the tax through - Businesses whose customers are primarily GST-registered businesses
Key point: Once you voluntarily register, you must stay registered for at least one year.
Small Supplier Threshold
Businesses with annual taxable supplies under $30,000 are called "small suppliers." They are not required to register but may choose to do so. Many small suppliers with business customers choose voluntary registration because their customers can claim the GST paid as an input tax credit.
How to Register
Register online through the CRA's My Business Account portal. You can also register by phone or paper form (Form RC1). Registration is free. Your GST/HST account number will start with "RT" followed by your business number.
Once registered, you must charge GST/HST on all your taxable supplies from the effective registration date forward.
What to Charge: GST vs. HST vs. Neither
Not everything is subject to GST/HST. Here's the breakdown:
Zero-Rated Supplies (0% GST/HST — but you can still claim ITCs)
These are taxable at 0% — you're still registered, can claim input tax credits, but don't collect tax: - Basic groceries (bread, milk, fruit — not prepared food) - Medical devices and prescriptions - Agricultural products (livestock, grain) - Most fishery products - Exported goods and services - Financial services (most)
Exempt Supplies (no GST/HST — and no ITCs)
These are outside the GST/HST system entirely — you don't charge tax and can't claim input tax credits on related inputs: - Most healthcare services - Educational services (tuition) - Residential rent - Financial services (interest, dividends) - Childcare services
Taxable Supplies (GST or HST at applicable rate)
Everything else: consulting services, software, office supplies, professional services, restaurant meals, etc.
The practical rule: If in doubt, charge GST/HST. You can refund it if it turns out you shouldn't have charged it. Failing to charge when you should have means you owe the tax out of pocket.
How to Remit GST/HST
As a GST/HST-registered business, you collect tax from your customers and remit it to the CRA, minus any input tax credits you've paid on business expenses.
The calculation:
GST/HST collected from customers
− ITCs (GST/HST paid on business expenses)
= Net GST/HST remittance to CRA
Reporting Periods
Your remittance frequency depends on your annual taxable supplies:
| Annual Supplies | Reporting Period |
|---|---|
| Under $1.5 million | Annual (file by June 30) |
| $1.5 million – $6 million | Quarterly |
| Over $6 million | Monthly |
You can also voluntarily elect to report more frequently than required.
Quick Method for Small Business
The Quick Method is an alternative accounting method available to small businesses with annual taxable supplies under $400,000 (including GST/HST). Instead of tracking ITCs on every expense, you remit a higher percentage of your collected GST/HST:
- General rate: Remit 8.8% of all taxable supplies (instead of the net calculation)
- Food and beverage: Remit 6.6% (verify 2026 rate — 6.6% was current as of last CRA update)
The Quick Method reduces paperwork but is not always cheaper — run the numbers against the regular method.
Input Tax Credits (ITCs)
Input tax credits are the mechanism that makes GST/HST a "tax on final consumption" rather than a tax on business inputs. When you pay GST/HST on business expenses, you can deduct that from what you collect from customers.
Example: - You bill a client $10,000 + $1,300 HST (Ontario, 13%) - You paid $500 HST on office supplies and software - You remit: $1,300 − $500 = $800 to the CRA
The CRA only receives the 13% on the final value of the service — not on the business inputs along the way.
Rules for claiming ITCs: - The expense must be for business use (not personal) - You must have a proper tax invoice (see below) - The ITC must be claimed within the earlier of four years or the period you're filing for - No ITC on expenses related to exempt supplies
Tax Invoices: The Documentation Requirement
To claim ITCs, you need a proper tax invoice. A valid invoice must include: - Supplier's name and GST/HST registration number - Customer's name - Date of supply (or invoice date) - Description of goods/services - Quantity and amount - GST/HST rate and amount charged - Total amount payable
Keep records for six years — this is a CRA audit requirement.
Provincial Sales Tax (PST): A Separate System
In BC, Saskatchewan, Manitoba, and Manitoba, PST is collected separately from GST and remitted to the provincial government, not the CRA.
| Province | GST | PST | Total |
|---|---|---|---|
| British Columbia | 5% | 7% | 12% |
| Saskatchewan | 5% | 6% | 11% |
| Manitoba | 5% | 7% | 12% |
| Quebec | 5% | 9.975% (QST) | ~15% |
Note: Alberta has no provincial sales tax.
Common GST/HST Mistakes
| Mistake | Impact | Prevention |
|---|---|---|
| Not registering when you exceed $30K | Penalties + interest from the date you should have registered | Track taxable supplies monthly |
| Charging GST in a GST province and HST in an HST province | Incorrect collection, may need to refund | Know your province's rate |
| Missing input tax credit documentation | Lost ITCs, audit risk | Keep every invoice |
| Not remitting on time | 5% penalty minimum, plus interest | Set calendar reminders for filing dates |
| Charging GST on exempt supplies | Must refund with interest | Know your supply categories |
GST/HST and E-Commerce
If you sell goods or services to customers in Canada, you charge GST/HST based on where the supply is made: - Services: Taxed in the province where the customer is located - Goods shipped: Taxed in the province where the goods are delivered - Digital services to consumers: GST/HST based on customer's location (CRA platform seller rules apply above certain revenue thresholds)
For e-commerce platforms: If you're using a marketplace that collects and remits GST/HST on your behalf (like Shopify or Amazon), confirm the platform's GST/HST registration and collection obligations.
The Bottom Line
GST/HST registration is straightforward once you know the rules: register when you hit $30,000 in annual taxable supplies (or voluntarily), charge the correct rate for your province, collect from customers, claim your input tax credits on business expenses, and remit to the CRA on time.
The compliance burden is manageable for most small businesses. If you're growing and finding the quarterly or monthly remittances complex, a bookkeeper or accountant can handle it easily.
Draft prepared by CMO | 2026-04-09 For AccountingTitan Phase 2 content production — target: publish Thu Apr 30 Note: Canadian GST/HST rates current as of 2026. Confirm with CTO before publish.
