GST/HST for small business in Canada: a bookkeeping guide

Q: What are input tax credits?

Input tax credits are the GST/HST you paid on business purchases, which you can generally claim back. They reduce the net tax you remit, so recording every eligible one (with the receipt kept) directly lowers what you owe on your return.

GST/HST is money you collect on the government's behalf, not revenue you get to keep. Track it cleanly and filing is a five-minute export. Mix it into sales and you can overpay, underpay, or scramble at deadline. Here is how the pieces fit together in your books.

The core idea: you charge tax on what you sell (output tax) and you pay tax on what you buy (input tax). You remit the difference to the CRA. The tax you collect is a liability — it was never yours — and the tax you pay on expenses is usually recoverable.

When you have to register

Most businesses must register for GST/HST once their taxable revenue passes the $30,000 small-supplier threshold over four consecutive calendar quarters. Below that you can register voluntarily — often worth it, because registering lets you claim back the tax you pay on your own purchases.

Charging the right rate

The rate follows the customer's province — 5% GST in some provinces, or HST (13–15%) in the participating ones. For online sellers, that means place-of-supply rules, not just where you are based.
Some sales are zero-rated or exempt — basic groceries, certain exports and some services are taxed at 0% or not at all. Coding these correctly keeps your filing accurate.

Input tax credits (ITCs)

When you buy things for the business and pay GST/HST, you can generally claim that tax back as an input tax credit — provided the purchase was for commercial activity and you kept the receipt. ITCs are what reduce your net remittance, so capturing every eligible one directly lowers what you owe.

Tracking it in your books

Use dedicated tax accounts — a liability account for tax collected and one for ITCs, so the net is always visible without hand-math.
Let your software apply tax codes — correct codes on every sale and expense mean the return practically fills itself.
Keep receipts with the entries — the CRA can ask you to support any ITC you claim.
Reconcile the tax accounts — the balance in your GST/HST payable account should tie to what your return says you owe.

Set the money aside. Because collected tax is a liability, the smartest habit is to move it out of your operating cash as you go — so remittance day is a transfer, not a cash-flow shock.

Filing and remittance

Your filing frequency — annual, quarterly or monthly — depends on your revenue, and each has its own deadlines. When your books are current and reconciled, preparing the return is mostly a matter of reading the net tax figure and filing it. Late filing and late remittance both carry penalties and interest, so the calendar matters as much as the math.

Tired of untangling sales tax every quarter?

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Official references

This guide is general educational information, not accounting or tax advice. Rates, thresholds and rules change — confirm the current details with the CRA or your accountant.

Frequently asked questions

When does a small business have to register for GST/HST?

Generally once taxable revenue exceeds the $30,000 small-supplier threshold over four consecutive calendar quarters. Below that, registration is optional — but registering lets you claim back the GST/HST you pay on business purchases, which is often worth it even for smaller businesses.

Is GST/HST collected considered revenue?

No. Tax you collect is a liability you owe to the CRA, not income. It should sit in a separate tax-payable account and never be counted as sales — treating it as revenue overstates your income and sets you up to come short at remittance time.

What are input tax credits?

Input tax credits are the GST/HST you paid on purchases made for your business, which you can generally claim back. They reduce the net tax you remit, so recording every eligible one (with the receipt kept) directly lowers what you owe on your return.