Chapter 2: The Goods and Services Tax (GST) and Harmonized Sales Tax (HST)

On this page..

• What is the GST/HST?
• How to register for the GST/HST
• How to collect GST/HST on the taxable goods and services you provide
• Input tax credits
• Simplified accounting methods
• How to calculate the GST/HST you owe and file your return
• GST/HST Rulings

What is the GST/HST?

The GST is a tax that applies at a rate of 6% to the supply of most goods and services in Canada. Three provinces (Nova Scotia, New Brunswick, and Newfoundland and Labrador) harmonized their provincial sales tax with the GST to create the harmonized sales tax (HST). The HST applies to the same goods and services as the GST, but at a rate of 14%. Of this, 6% is the federal part and 8% is the provincial part.

Although the consumer ultimately pays the GST/HST, generally businesses are responsible for collecting and remitting it to the government. Businesses that must register or that register voluntarily for the GST/HST are called registrants.

Registrants collect the GST/HST on most of their supplies, and pay the GST/HST on most purchases they make to operate the business. Registrants can claim a credit, called an input tax credit (ITC), to recover the GST/HST they paid or owe on the purchases they will use in their commercial activities. When they complete their GST/HST return, they deduct the amount of the credit from the GST/HST they collected. If they pay more than they collect, they can claim a refund.

On which goods and services do you charge GST/HST?

As a GST/HST registrant, you charge 6% GST or 14% HST on the taxable goods and services (other than zero-rated) you sell, lease, transfer, or provide in some other way. You can claim an input tax credit to recover the GST/HST you paid or owe on purchases and expenses you use, consume, or supply in your commercial activities.

Examples of goods and services taxable at 6% or 14% include:

• commercial real property and newly constructed residential property;
• rentals of commercial real property;
• clothing and footwear;
• car repairs; and
• hotel accommodation.

Certain goods and services are subject to GST/HST, but at a rate of 0%. These goods and services are referred to as zero-rated supplies. You do not charge tax on these supplies, but you are still able to claim an ITC to recover the GST/HST you paid or owe on purchases made to provide them.

Examples of zero-rated goods and services include:

• basic groceries such as milk, bread, and vegetables;
• most farm livestock;
• medical devices such as hearing aids and artificial teeth;
• prescription drugs and drug dispensing fees; and
• exports (most goods and services taxable at 6% or 14% in Canada are zero-rated when exported).

Which goods and services are tax-exempt?

Some goods and services are exempt from the GST/HST. You do not collect GST/HST on these goods or services. You cannot claim an ITC to recover the GST/HST you pay or owe on purchases and expenses relating to such supplies.

You cannot register for the GST/HST if you're selling or providing only tax-exempt goods and services.

Tax-exempt goods and services include:

• sales of previously owned residential housing;
• residential rents of one month or more and residential condominium fees;
• most health, medical, and dental services that are performed by licensed physicians or dentists for medical reasons;
• day-care services provided for less than 24 hours per day primarily to children 14 years of age and younger;
• bridge, road, and ferry tolls;
• legal aid services;
• many educational services such as those courses supplied by a vocational school that lead to a certificate or diploma and allow the practice of a trade or a vocation, or tutoring services made to an individual in a course that follows a curriculum designated by a school authority;
• most services provided by financial institutions (e.g., arrangements for a loan or mortgage);
• arranging for and issuing insurance policies by insurance companies, agents, and brokers;
• most goods and services provided by charities; and
• certain goods and services provided by non-profit organizations, governments, and other public-sector organizations such as municipal transit services and standard residential services such as water.

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Who registers for the GST/HST?

You have to register for GST/HST if:

• you provide taxable goods and services in Canada; and
• you are not a small supplier.

You do not have to register if your only commercial activity is the sale of real property otherwise than in the course of a business or if you are a non-resident who does not carry on business in Canada. If you are a non-resident, see guide RC4027, Doing Business in Canada - GST/HST Information for Non-Residents.

Small supplier

You are a small supplier if you meet one of the following conditions:

• if you are a sole proprietor, your total taxable revenues (before expenses) from all your businesses are $30,000 or less in the last four consecutive calendar quarters and in any single calendar quarter.
• if you are a partnership or a corporation, the total taxable revenues of the partnership or corporation are $30,000 or less in the last four consecutive calendar quarters and in any single calendar quarter.
• if you are a public service body (charity, non-profit organization, municipality, university, public college, school authority, or hospital authority), the total taxable revenues from all the activities of your organization are $50,000 or less in the last four consecutive calendar quarters and in any single calendar quarter. A gross revenue threshold also applies to charities and public institutions. For more information, see guide RC4082, GST/HST Information for Charities.

In all cases, total taxable revenues means your worldwide revenues from your supplies of goods and services subject to GST/HST at a rate of 6% and 14% respectively, and your zero-rated supplies. However, it does not include goodwill, financial services, and sales of capital property. You also have to include the total taxable revenues of all your associates in this calculation. Contact us if you need help to determine if you are associated to another person.

If your total taxable revenues exceed $30,000 ($50,000 for public service bodies) in any single calendar quarter or in four consecutive calendar quarters, you will no longer be considered a small supplier and you have to register for the GST/HST. Contact us if this occurs.

Voluntary registration

Although you do not have to register for the GST/HST if your taxable worldwide revenues are $30,000 or less (or $50,000 if you are a public service body), you can register voluntarily.

How to register for the GST/HST

If you have to register, or if you are a small supplier and want to register, use our quick and secure Business Registration Online.

You can also provide the necessary information to us over the telephone or by facsimile transmission. Alternatively, you can complete Form RC1, Request for a Business Number (BN) and return it to us. For more information, visit our How to register Web page, or call us at 1-800-959-5525.

Remember that if your business is in Quebec, you should contact Revenu Québec.

Reporting periods

We will assign you a reporting period for filing your GST/HST returns when you register for the GST/HST. For each reporting period, you must file a GST/HST return.

The GST/HST reporting period is based on your estimated total annual taxable revenues in Canada as well as the annual taxable revenues of all your associates, if applicable.

The following chart shows the assigned GST/HST reporting periods based on your annual taxable revenues.

If your annual taxable revenues are $500,000 or less, you may elect to file your GST/HST return quarterly or monthly.

If your annual taxable revenues are more than $500,000, but not more than $6,000,000, you may elect to file your GST/HST return monthly.

For more information, see guide RC4022, General Information for GST/HST Registrant and form GST20, Election for GST/HST Reporting Periods.

How to collect GST/HST on the taxable goods and services you provide

As a GST/HST registrant, you generally charge 6% GST or 14% HST on the taxable supplies you make (other than zero-rated supplies). You remit the GST and the HST on the same GST/HST return.

Note
If you make taxable supplies (other than zero-rated) to customers in Nova Scotia, New Brunswick, or Newfoundland and Labrador, including supplies shipped or mailed to recipients in these provinces, you are required to collect and remit the 14% HST.

Provincial sales tax

When you have to charge both GST and the provincial sales tax (PST), calculate GST on the price before you calculate the PST. For more information on how to calculate PST, contact your provincial tax office. You'll find the phone numbers of the provincial tax offices in the government section of your telephone book.

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Informing your customers

As a GST/HST registrant, you must show your customers the total tax payable or let them know that the amount payable includes the tax. You can show this to your customers on the invoice, receipt, or contract, or by displaying acceptable signs. If you show the tax on your invoice, receipt, or contract, you must show the total tax or the total of the tax rate, that is, 6% or 14%.

What to put on your invoices

At the request of your customers who are GST/HST registrants, you must provide them with specific information that will allow them to support their ITC claim. The following chart shows the required information.

Information required for sales invoices from GST/HST	Total sale under $30	Total sale from $30 to $149.99	Total sale of $150 or more
The vendor’s business or trading name or the intermediary’s name
Invoice date or, if an invoice has not been issued, the date on which the GST/HST is paid or payable
Total amount paid or payable
The total amount of GST/HST charged or that the amount paid or payable for each taxable supply (other than zero-rated supplies) includes GST/HST and the applicable rate of tax (6% or 14%)
When items are taxable at 6% and 14%, a statement about which items are taxed at 6% and which are taxed at 14%
The vendor’s Business Number or the intermediary’s Business Number
The buyer’s name or trading name or the name of the duly authorized agent or representative
A brief description of the goods or services
Terms of payment

Input tax credits

As a GST/HST registrant, you can get back the GST/HST you paid or that you owe on purchases and expenses related to your commercial activities. You do this by claiming an ITC.

You can recover the GST/HST you pay or owe on goods and services such as:

• merchandise to resell;
• advertising services;
• real property and capital property, such as office furniture, vehicles, and other equipment; and
• general operating expenses such as office rent, utilities, office supplies, and the rent of equipment such as computers, vehicles, photocopy machines, and other office appliances.

Where goods or services are used partly for personal use or for making exempt supplies, you are entitled to a partial ITC to the extent that they are for use in commercial activities.

In addition, you can claim ITCs for purchases of land and purchases eligible for capital cost allowance under the Income Tax Act, such as buildings, computers, vehicles, and other large machinery and equipment. Expenses for which you cannot claim an ITC include the following:

• employee wages;
• interest and dividend payments;
• most federal, provincial, and municipal taxes;
• most fees, fines, and levies;
• tax-exempt goods and services;
• items for your personal use or enjoyment;
• capital property that is not primarily for use in your commercial activities; and
• membership fees or dues to any club that provides recreational, dining, or sporting facilities (e.g., fitness clubs, golf clubs, hunting and fishing clubs), unless you acquire the memberships to resell in the course of your business.

How to claim an input tax credit

Most registrants claim their ITCs when they file their GST/HST return for the reporting period in which the related purchases were made. However, you must claim your input tax credit in a GST/HST return filed by the due date of the return for the last reporting period that ends within four years after the end of the reporting period in which the tax became payable on the purchase that qualifies for the credit.

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Simplified accounting methods

There are two simplified accounting methods available for small businesses to calculate the GST/HST they owe. They are the Quick Method and the simplified input tax credit method.

The Quick Method

The Quick Method is an easy way to calculate the amount of GST/HST you have to remit. Generally, if your worldwide taxable annual supplies (including zero-rated supplies and supplies of associates) are $200,000 or less (including GST/HST), you can use the Quick Method.

Certain persons, such as accountants, bookkeepers, financial consultants and public service bodies cannot use the Quick Method.

How the Quick Method works?

You collect GST at 6% or HST at 14% on taxable supplies to your customers in the usual manner. When you complete your GST/HST return, you remit part of the tax you collected. Since you cannot claim ITCs on most of your purchases when you use this method, the part of the tax that you keep accounts for the approximate value of the ITCs you would otherwise have claimed.

When you complete your GST/HST return, you multiply your total GST/HST included supplies for the reporting period by the Quick Method remittance rate that applies to those supplies. The remittance rates are explained in the booklet RC4058, Quick Method of Accounting for GST/HST.

You do not claim an ITC on your operating expenses (such as utilities, rent, and telephone), meal and entertainment expenses, and inventory purchases. However, you can claim ITCs on most of your purchases of capital and real property.

If you are using the Quick Method at the beginning of a fiscal year or on the day you become a registrant, you are entitled to a credit equal to 1% of your first $30,000 of supplies that are taxable at 6% or 14%.

For more information, see booklet RC4058, Quick Method of Accounting for GST/HST. A special Quick Method is also available for public service bodies. For more information see booklet RC4247, The Special Quick Method of Accounting for Public Service Bodies.

The simplified input tax credit method

You use the Simplified Method to calculate your ITCs if you do not want to keep track of the GST/HST you paid or owe on your business purchases.

Who can use it?

You can use the Simplified Method if you are registered for GST/HST and your (and your associates') annual worldwide taxable revenues from supplies of goods and services were $500,000 or less in your last fiscal year and the previous fiscal quarters of your current fiscal year. Do not include financial services, sales of capital real property or goodwill.

To use the simplified ITC method, your taxable purchases (excluding zero-rated purchases) in Canada must also not exceed $2 million in the immediately preceding fiscal year.

If you qualify, you can start using the Simplified Method at the beginning of any reporting period. You do not have to file any form to use it. After you decide to use this method, you must use it for at least one year if you continue to qualify.

How it works

To calculate your ITCs when you use this method, you total your taxable purchases, including GST or HST, provincial sales tax, tips, penalty and interest charges on late payments and

• multiply this total by 6 and divide the result by 106 for GST purchases; or
• multiply this total by 14 and divide the result by 114 for HST purchases.

For more information on the simplified ITC method, see guide RC4022, General Information for GST/HST Registrants.

How to calculate the GST/HST you owe and file your return

For each reporting period, you calculate:

• the GST/HST collected or collectible on your taxable supplies during the reporting period; and
• the GST/HST paid or payable on your purchases for which you can claim an input tax credit.

The difference between these two amounts, plus or minus any adjustments, is your GST/HST payment or your refund. If you charge more GST/HST than you paid or owe, you pay us the difference. Make cheques payable to the Receiver General. If you paid or owe more GST/HST than you charged, you can claim a refund.

GST/HST Rulings

GST/HST Rulings is the centre of technical expertise on the goods and services tax/harmonized sales tax (GST/HST) in the Canada Revenue Agency (CRA). Through our rulings and interpretations program, we give taxpayers timely, accurate, and accessible technical information on their entitlements and obligations under the Excise Tax Act and related regulations. For more information see publication RC4405, GST/HST Rulings - Experts in GST/HST Legislation.

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