Chapter 2: Goods and services tax (GST) and harmonized sales tax (HST)

On this page..

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

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What is GST/HST?

Goods and services tax (GST) is a tax that applies at a rate of 5% to the supply of most goods and services in Canada. Three participating provinces (Nova Scotia, New Brunswick, and Newfoundland and Labrador) harmonized their provincial sales tax (PST) with GST to create the harmonized sales tax (HST). HST applies to the same goods and services as GST, but at a rate of 13%. Of this, 5% is the federal part and 8% is the provincial part.

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

Generally, registrants collect GST/HST on their taxable supplies, and pay GST/HST on taxable purchases they make to operate the business. Registrants can generally claim a credit, called an input tax credit (ITC), to recover the GST/HST they paid or owe on the purchases they use, consume or supply 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.

The term commercial activity generally means any business, adventure, or concern in the nature of trade carried on by certain persons, except when making exempt supplies.

Taxable goods and services means goods and services taxable at 0%(zero-rated), 5% or 13%.

Types of goods and services

There are three types of goods and services for GST/HST purposes:

• goods and services taxable at 5 % or 13 %;
• goods and services taxable at 0 % (zero-rated); and
• exempt goods and services.

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

As a GST/HST registrant, you charge 5% GST or 13% HST on the taxable goods and services (other than zero-rated) you sell, lease, transfer, or provide in some other way. You can generally claim an ITC to recover the GST/HST you paid or owe on purchases, expenses and imports you use, consume, or supply in your commercial activities.

Examples of goods and services taxable at 5 % or13 % include:

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

A limited number of supplies of goods and services are taxable at the rate of 0%. They 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 5 % or 13 % in Canada are zero-rated when exported).

Which goods and services are tax-exempt?

Some goods and services are not subject to GST/HST. They are tax-exempt. 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 GST/HST if you are selling or providing only tax-exempt goods and services.

Tax-exempt goods and services include:

• sales of most used residential housing;
• most 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 (ferry tolls are zero-rated if the service is to or from a place outside Canada);
• 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 such as lending money or operating deposit accounts;
• arranging for and issuing insurance policies by insurance companies, agents, and brokers;
• most goods and services provided by charities;
• 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 distribution; and
• music lessons.

Registering for GST/HST

Who registers for 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. To find out if you are a small supplier, see the next section.

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:

• you are a sole proprietor with total taxable revenues (before expenses) from all your businesses of $30,000 or less in the last four consecutive calendar quarters and in any single calendar quarter;
• you are a partnership or a corporation and 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; or
• you are a public service body (charity, non-profit organization, municipality, university, public college, school authority, or hospital authority) and 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 of $250,00 also applies to charities and public institutions. For more information, see Guide RC4082, GST/HST Information for Charities.

In all cases, your total taxable revenues include your worldwide revenues from your supplies of goods and services subject to GST/HST at a rate of 5% and 13%, and your zero-rated supplies. However, they do 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 at 1-800-959-5525 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 are no longer considered a small supplier and you have to register for GST/HST.

You can register online, or by completing and submitting Form RC1, Request for a Business Number (BN).

Exception
Taxi and limousine operators, for their taxi operations, and non-resident performers selling admissions to seminars and other events must register for the GST/HST, even if they are small suppliers.

Voluntary registration

If you are a small supplier and you are engaged in a commercial activity in Canada, you can choose to register voluntarily, even if you are not legally required to do so.

If you register voluntarily, you have to charge and remit GST/HST on your taxable supplies of goods and services, and you can claim ITCs for the GST/HST you paid or owe on eligible purchases related to these supplies. Generally, you have to stay registered for at least one year before you can ask to cancel your registration.

If you cancel your registration, you may have to remit part of the ITCs you claimed on certain properties you have on hand, such as inventory and capital property.

How to register for 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 fax. Alternatively, you can complete Form RC1, Request for a Business Number (BN) and send it to us. For more information, visit our Business Number (BN) registration page, or call us at 1-800-959-5525.

Remember that if your business is in Quebec, you should contact Revenu Quebec at1-800-567-4692.

Reporting periods

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

The GST/HST reporting period is based on your total annual taxable revenues in Canada as well as the annual taxable revenues of all your associates, if applicable. This amount does not include zero-rated exports of goods and services, zero-rated financial services, taxable sales of capital real property, and goodwill.

Before each filing due date, we will send you a personalized return. Although we assign you a specific reporting period, you may choose another period if you meet certain conditions.

The following chart shows the assigned and optional GST/HST reporting periods, based on your annual taxable revenues, for fiscal years beginning after 2007.

Annual taxable revenues	Assigned reporting periods	Optional reporting periods
$1,500,000 or less	Annually	Monthly/Quarterly
More than $1,500,000 up to $6,000,000	Quarterly	Monthly
More than $6,000,000	Monthly	Nil

If your annual taxable revenues are $1,500,000 or less, you may elect to file your GST/HST return quarterly or monthly.

If your annual taxable revenues are more than $1,500,000, but not more than $6,000,000, you may elect to file your GST/HST return monthly.

Filing and remitting due dates

Monthly and quarterly filers

If your reporting period is monthly or quarterly, you have to file your GST/HST return and remit any amount owing no later than one month after the end of your reporting period.

Annual filers

If your reporting period is annual, you usually have to file your return and remit any amount owing no later than three months after the end of your fiscal year.

As an annual filer, you may also have to pay quarterly instalments. If so, they are due no later than one month after the last day of each fiscal quarter. If you base your instalments on an estimate of your current-year net tax and underestimate your net tax, we may charge you penalty and interest.

For fiscal years beginning after 2007, you will be required to make instalment payments throughout a fiscal year if your net tax in the previous fiscal year was $3,000 or more. For a fiscal year that began in 2007, you still need to use the previous threshold amount of $1,500 to determine if you are required to make instalment payments throughout the fiscal year.

To start making instalment payments, you need to order Form RC160, GST/HST Interim Payments Remittance Voucher. You will not automatically receive Form RC160 for your next instalment payment unless you make the current payment. For more information on Form RC160, see Guide RC4022, General Information for GST/HST Registrants.

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

As a GST/HST registrant, you generally charge 5 % GST or 13 % HST on the taxable supplies you provide (other than zero-rated supplies). You remit GST and HST on the same GST/HST return.

Note
If you provide 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 13 % HST.

Provincial sales tax

When you have to charge both GST and provincial sales tax (PST), calculate GST on the purchase price excluding PST. For more information on how to calculate PST, contact your provincial tax office. Visit our Related provincial and territorial government sites page for links to provincial and territorial departments of finance, business service centres, and other tax and financial services. You will find the phone numbers of the provincial tax offices in the government section of your telephone book.

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 (e.g., 5 % or 13 %).

What to put on your invoices

You have to give customers who are GST/HST registrants specific information that will allow them to support their claims for ITCs and rebates for the GST/HST you charged. The following chart shows the required information.

Information required for sales invoices from GST/HST registrants	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 tax rate
When you supply items taxable at different rates, a statement about which items are taxed at the GST rate and which are taxed at the HST rate
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

Note
Intermediary of a person for a particular supply means a registrant who, under an agreement with the person, causes or facilitates the making of the supply by the person.

Input tax credits (ITCs)

A fundamental principle of GST/HST is that no tax should be incorporated into the cost of inputs that registrants use in commercial activities. With certain exceptions, registrants are entitled to a refundable credit, called an input tax credit (ITC), for tax paid or payable on purchases that relate to a commercial activity.

Commercial activities include the supply of goods and services taxable at 0 %, 5 %, and 13 %. Commercial activities do not include the supply of exempt goods and services, such as long-term residential rent (for example, of one month or more). Therefore, you cannot claim ITCs for the GST/HST you paid or owe on items that you use to provide exempt goods and services, or for personal use.

You can recover the GST/HST you pay or owe on goods and services you use in operating a business of making taxable supplies. Examples are:

• merchandise you purchase for resale;
• advertising services;
• personal and real capital property, such as office furniture, vehicles, other equipment, and buildings used in the operation of the business; and
• general operating expenses such as office rent, utilities, office supplies, and the rental 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, with certain exceptions for capital property, as discussed below.

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 personal property that is not primarily for use in your commercial activities;
• capital real property for use 10% or less in your commercial activities (If you are an individual using the property more than 50% for your, or a related individuals’, personal use, you cannot claim an ITC even if you are using that property more than 10% in commercial activities.); and
• membership fees or dues to any club that provides recreational, dining, or sporting facilities (such as fitness clubs, golf clubs, hunting and fishing clubs), unless you acquire the memberships to resell in the course of your business.

For more information, see Guide RC4022, General Information for GST/HST Registrants.

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. If you do not claim ITCs at that time, you have four years after the end of that reporting period to claim them on a GST/HST return.

When you calculate your ITCs, you can include purchases for which you have received an invoice, but that you have not yet paid.

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 Method for claiming ITCs.

The Quick Method

The Quick Method is an easy way to calculate the amount of GST/HST you have to remit.

Who can use it

Generally, you can use the Quick Method if your worldwide taxable annual supplies (including zero-rated supplies and supplies of associates) are $200,000 or less (including GST/HST) in any four consecutive fiscal quarters over the last five fiscal quarters. This amount does not include supplies of financial services, sales of real property, sales of capital assets, and goodwill.

Certain businesses cannot use the Quick Method including accountants, bookkeepers, financial consultants, and public service bodies.

The Special Quick Method is a simplified accounting option available to selected public service bodies, qualifying non-profit organizations, specified facility operators, and certain charities. For more information, see Pamphlet RC4247, The Special Quick Method of Accounting for Public Service Bodies.

How the Quick Method works

You collect GST at 5 % or HST at 13 % 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 supplies (GST/HST included) for the reporting period by the Quick Method remittance rate that applies to those supplies. The remittance rates are explained in 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. You can claim these credits when you complete your GST/HST return. However, if you dispose of capital assets, you must remit the full 5 % GST or 13 % HST, not the Quick Method percentage.

For more information, see Booklet RC4058, Quick Method of Accounting for GST/HST.

The simplified Method for claiming ITCs

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 zero-rated financial services, sales of capital real property, or goodwill.

Listed financial institutions, however, cannot use the Simplified Method.

To use the Simplified Method for claiming ITCs, your taxable purchases (excluding zero-rated purchases but including purchases imported into Canada or brought into a participating province) 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 the Simplified Method works

Using this method, your records do not have to show GST/HST separately from the total purchases. However, you must be able to total your taxable purchases for which you can claim an ITC. In addition, if you make purchases in both participating and non-participating provinces, you must separate purchases on which you paid GST and those on which you paid HST. You must keep the usual documents to support your ITC claims for audit purposes.

For more information on the Simplified Method, see Guide RC4022, General Information for GST/HST Registrants.

Filing your GST/HST returns

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

For each reporting period, you calculate:

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

The difference between these two amounts, plus or minus any adjustments, is your net tax (your GST/HST payment or your refund). If you charge more GST/HST than you paid or owe, you pay us the difference. If you paid or owe more GST/HST than you charged, you can claim a refund. We will automatically send you Form GST34, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return for Registrants, which includes pre-printed information about your account.

The personalized return we send you for each reporting period is not available on our Web site as we can only provide it in a pre-printed format. If you do not receive a personalized return within 15 working days of the end of your reporting period, or if you misplace it, you can use Form GST62, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return (Non-personalized), instead.

If you have not received the personalized GST/HST return (Form GST34) 15 working days before its due date, or if you lose your GST/HST return, call 1-800-959-2221 to get Form GST62.

Note
You still have to file your return and pay any net tax owing by the due date even if you do not receive your personalized return on time.

How to file your return and remit any amount owing

Depending on your situation, you may have up to four different options for filing your GST/HST return and remitting any amount owing:

By mail

You can mail your return and your remittance, if any, to the address shown on the GST/HST return.

Print your BN on your cheque and make it payable to the Receiver General for Canada. Do not send cash in the mail. To avoid processing delays, do not staple or attach receipts or other supporting documents to your return.

Note
You have to make your remittance at your financial institution if it is more than $50,000.

At your financial institution

If you are remitting an amount owing, you can take your return and remittance to your participating financial institution in Canada, unless:

• you are offsetting an amount owing on the return by a rebate or refund;
• you are claiming a refund; or
• you are filing a nil return.

In these cases, you have to mail your return and remittance to the address shown on your return. You cannot claim a refund or rebate at your bank or financial institution.

If you are paying at a financial institution and your return requires attached documentation, you will have to send us these documents separately.

Using GST/HST NETFILE and TELEFILE

You may be eligible to file your return electronically using GST/HST NETFILE or TELEFILE. You need to have a four-digit access code printed on the working copy of your personalized GST/HST return and you need to meet certain conditions. See Guide RC4022, General Information for GST/HST Registrants, to find out if you are eligible to file using GST/HST NETFILE or TELEFILE.

Use Form RC158, GST/HST Netfile/Telefile Remittance Voucher, to remit any amount owing on a return that you file using GST/HST NETFILE or TELEFILE. Form RC158 is not available on our Web site as we can only provide it in a pre-printed format. To order Form RC158, call us at 1-800-959-2221.

For more information, visit our GST/HST NETFILE page.

Using Electronic Data Interchange (EDI)

Returns and remittances can also be filed electronically through a participating financial institution. For more information, visit our GST/HST EDI page, or contact your financial institution.

Stop filing GST/HST returns temporarily

As a registrant, you must file your returns for each reporting period, even if you do not have to remit any net tax.

However, if you operate a seasonal or part-time business, or if you are a non-resident who carries on business in Canada only for a short period of time each year, and you normally file on a quarterly or monthly basis, you may be eligible to stop filing GST/HST returns for reporting periods for which you have little or no GST/HST to report. For this to apply, you need to meet certain criteria. For more details, visit our GST/HST page, or see Guide RC4022, General Information for GST/HST Registrants, or call 1-800-959-5525.

GST/HST Rulings

GST/HST Rulings is the centre of technical expertise on GST/HST in the Canada Revenue Agency. 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 Guide RC4405, GST/HST Rulings - Experts in GST/HST Legislation.

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