The Goods and Services Tax (GST) is a broad-based tax of 5% that applies to most supplies of goods and services made in Canada. In some provinces, the GST has been combined with the provincial sales tax to create the Harmonized Sales Tax (HST). The HST rates vary by province, ranging from 13% to 15%. Understanding how the GST/HST works is essential for both businesses and consumers.
Most businesses that provide taxable goods or services in Canada and have annual worldwide taxable revenues of more than $30,000 must register for the GST/HST. Even if your revenue is below this threshold, you may choose to register voluntarily, which allows you to claim input tax credits for the GST/HST you pay on your business expenses. Once registered, you will receive a GST/HST account number as part of your Business Number (BN) from the Canada Revenue Agency (CRA).
As a GST/HST registrant, you are responsible for collecting the tax from your customers on your taxable supplies and remitting it to the CRA. You must file regular GST/HST returns, the frequency of which depends on your annual revenue. On your return, you calculate the amount of GST/HST you collected and subtract any input tax credits (ITCs) you are eligible to claim. The resulting amount is either the tax you owe or the refund you are entitled to.
ITCs are a way for businesses to recover the GST/HST they pay on the goods and services they use or consume in the course of their commercial activities. This ensures that the tax is only paid by the final consumer. To claim ITCs, you must have the necessary documentation, such as invoices or receipts, that show the amount of GST/HST paid and the vendor's registration number. We provide detailed information on what expenses qualify for ITCs and how to claim them on your returns.
Consumers pay the GST/HST on most of their purchases. However, some goods and services are zero-rated (taxed at 0%) or exempt from the tax. Zero-rated supplies include basic groceries, most prescription drugs, and certain medical devices. Exempt supplies include most health and dental services, educational services, and long-term residential rents. Low- and modest-income individuals and families may also be eligible for the GST/HST credit, which is a tax-free quarterly payment that helps offset the costs of the tax.