If you run a small business in Canada and you have ever typed "do I need to charge GST" into Google at 11pm, this guide is for you. GST and HST confuse almost every new business owner, and the CRA's official documentation is written for tax lawyers, not people running a cafe or a landscaping company.
Here is everything you actually need to know, in plain language.
What is GST and HST?
GST (Goods and Services Tax) is a federal tax of 5% that applies to most goods and services sold in Canada. It goes to the federal government.
HST (Harmonized Sales Tax) is a combined federal and provincial tax used in provinces that chose to merge their provincial sales tax with the GST. In those provinces, instead of paying GST and PST separately, you pay one combined rate (HST) and remit it all to the CRA, who splits it with the province.
If you operate in an HST province, you only deal with one tax: HST, and remit it all to the CRA. If you operate in a non-HST province, you deal with GST separately from provincial tax.
Both GST and HST are consumption taxes. That means your customer pays them, not you. Your job as a business owner is to collect them from customers and pass them to the CRA. You are essentially a tax collector on the government's behalf.
Do I need to register?
You are required to register for a GST/HST account when your total revenues exceed $30,000 in any 12-month period. This threshold applies to a single calendar quarter or any four consecutive quarters.
Once you cross $30,000, you must register within 29 days and start charging GST/HST on your sales. If you stay under $30,000, you are a small supplier and registration is optional, but you can register voluntarily even if you are under the threshold, which often makes sense if you have significant business expenses you want to claim back.
The $30,000 threshold is based on your total revenue, not your profit. It includes all your sales before any expenses. Many owners miscalculate this and register late, which leads to penalties.
Who is exempt from registering?
Some businesses are exempt from charging GST/HST regardless of revenue. These include:
- Most residential rental income
- Sale of used residential property
- Most health care services (medical, dental, optometry)
- Most educational services
- Legal aid services
- Most financial services
If you are unsure whether your service is exempt, the CRA's list of exempt and zero-rated supplies is the definitive source.
Rates by province
The rate you charge depends entirely on where your customer is located, not where you are. This is called the place of supply rule.
| Province / Territory | Tax Type | Rate |
|---|---|---|
| Ontario | HST | 13% |
| Nova Scotia | HST | 15% |
| New Brunswick | HST | 15% |
| Newfoundland and Labrador | HST | 15% |
| Prince Edward Island | HST | 15% |
| British Columbia | GST + PST | 5% + 7% = 12% |
| Saskatchewan | GST + PST | 5% + 6% = 11% |
| Manitoba | GST + RST | 5% + 7% = 12% |
| Quebec | GST + QST | 5% + 9.975% = ~15% |
| Alberta | GST only | 5% |
| Territories (YK, NT, NU) | GST only | 5% |
If you sell to customers across multiple provinces (common for online businesses) you need to track where each customer is and apply the correct rate. This is one of the main reasons Canadian accounting is more complex than it looks.
PST and QST: the other taxes
In provinces that have not harmonized with the federal GST, you also have to deal with a separate provincial sales tax (PST). BC, Saskatchewan, and Manitoba each have their own PST rules, registration requirements, and filing schedules that are completely separate from the CRA.
Quebec is its own world. The QST (Quebec Sales Tax) is administered by Revenu Quebec, not the CRA. If you have customers in Quebec, you may need to register with Revenu Quebec separately and file QST returns on their schedule. The QST rate is 9.975%, making the combined rate approximately 14.975%.
"The place of supply rule means the rate you charge follows your customer, not your business address."
If most of your customers are in one province, this is manageable. If you are selling online across Canada, a good accounting system that tracks the province of each sale becomes essential. Doing it in a spreadsheet gets painful fast.
How to collect it correctly
Once you are registered, every invoice you send must include:
- Your GST/HST registration number (format: 123456789 RT0001)
- The date of the transaction
- The total amount charged
- The amount of GST/HST charged, or a statement that it is included and the applicable rate
- A description of the goods or services supplied
If your invoice total is under $100, you can show the GST/HST as included rather than breaking it out separately. Over $100, you need to show it as a separate line. Over $150, you also need your business name and address.
You can show the tax amount on the invoice as a separate line item ("HST: $39.00") or as tax-inclusive pricing with a note ("Price includes 13% HST"). Either is acceptable. Most businesses prefer the separate line: it is cleaner for your customers and easier to track.
Input tax credits: getting money back
This is the part most new business owners do not fully understand, and it is worth understanding because it puts real money back in your pocket.
As a GST/HST registrant, you can claim back the GST/HST you paid on your business expenses. These claims are called Input Tax Credits (ITCs). The logic: since you are collecting GST/HST on behalf of the government, you only owe them the net amount: what you collected, minus what you paid.
If you collected $2,000 in HST from customers and paid $600 in HST on your business supplies and expenses, you remit $1,400 to the CRA, not $2,000. The $600 is your input tax credit.
What qualifies for ITCs?
Most business expenses that had GST/HST charged qualify, including:
- Office rent and utilities
- Business equipment and supplies
- Software and subscriptions used for business
- Professional services (accountant, lawyer)
- Advertising and marketing
- Business vehicle expenses (proportional to business use)
- Meals and entertainment at 50% (only 50% of the GST/HST qualifies)
To claim an ITC, you must have a receipt or invoice showing the supplier's name, GST/HST number, and the amount of tax charged. This is why keeping every business receipt matters. Each one is worth money back.
Filing deadlines
How often you file depends on your annual revenue:
| Annual Revenue | Filing Frequency | Deadline |
|---|---|---|
| Under $1.5M | Annually | 3 months after fiscal year-end |
| $1.5M to $6M | Quarterly | 1 month after each quarter |
| Over $6M | Monthly | 1 month after each month |
Most small business owners file annually or quarterly. The CRA will assign you a filing frequency when you register, but you can request to file more frequently if you prefer (some businesses do this to get their refunds sooner).
Annual filers may still need to make quarterly instalment payments if their net tax owing was over $3,000 in the previous year. Missing instalments triggers interest charges even if you file and pay correctly at year-end.
Mistakes that trigger CRA audits
After years of watching small businesses navigate GST/HST, the same errors come up repeatedly. These are the ones most likely to create problems:
1. Forgetting to register after crossing $30,000
The threshold triggers a legal obligation within 29 days. Many owners do not realize they have crossed it until month-end reconciliation, by which point they may already be late. The CRA can assess penalties for late registration and require you to remit the GST/HST you should have collected, out of your own pocket, since you never charged it.
2. Claiming ITCs without proper receipts
The CRA requires supporting documentation for every ITC claimed. A bank or credit card statement alone is not enough. You need the actual receipt showing the supplier's GST/HST number. Missing or informal receipts are the most common audit trigger.
3. Mixing personal and business expenses
You can only claim ITCs on expenses that are used for commercial activity. Claiming ITCs on personal purchases, even small ones, is considered tax evasion if intentional. Keep your business and personal finances separate from day one.
4. Getting the place of supply wrong
Charging Ontario's 13% HST on a sale to an Alberta customer (where it should be 5% GST) is a problem. You have over-collected, which means you owe the CRA the correct amount, and the customer has overpaid. Conversely, under-collecting means you absorb the difference.
5. Filing late
The CRA charges compound daily interest and a late-filing penalty (5% of the balance owed, plus 1% for each full month late, up to a maximum of 12 months). Set reminders. File even if you cannot pay in full. Late filing adds penalties on top of interest.