If you run a small business in Canada, the Goods and Services Tax (GST) and Harmonized Sales Tax (HST) are an unavoidable part of your operations. Whether you sell products, provide services, or operate a mixed business, understanding when to register, how to charge and collect, how to file returns, and how to claim input tax credits is essential for staying compliant and maximising your cash flow.
The GST/HST system is more nuanced than most small business owners realise, and mistakes can be costly — both in penalties and in missed credits. This guide walks through every aspect of GST/HST as it applies to Canadian small businesses in 2026.
Understanding GST vs HST: Which Rate Applies?
The GST is the federal sales tax, charged at 5% across all of Canada. Several provinces have harmonised their provincial sales tax with the federal GST to create the Harmonized Sales Tax (HST). The combined HST rates vary by province: Ontario charges 13%, New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island all charge 15%.
British Columbia, Saskatchewan, Manitoba, and Quebec charge the 5% GST federally, but have their own separate provincial sales taxes (PST or QST) that operate independently. Alberta and the territories charge only the 5% GST with no provincial sales tax component.
Which rate you charge depends on the place of supply — generally where the customer is located or where the service is performed. If you are an Ontario business selling to a customer in Alberta, you charge 5% GST, not 13% HST. Getting the rate right on every transaction is critical for compliance. Our GST/HST calculator can help you determine the correct rate for different transaction types.
When Must You Register?
You are required to register for a GST/HST account when your total taxable revenue (including zero-rated supplies) exceeds $30,000 over four consecutive calendar quarters or in a single calendar quarter. Once you cross this threshold, you must register immediately and begin charging GST/HST on your taxable sales.
This $30,000 threshold is cumulative. If you earn $8,000 per quarter for four quarters ($32,000 total), you have exceeded the threshold and must register. If you earn $35,000 in a single quarter, you must register in that quarter even if it is your first quarter of business.
The "small supplier" exemption allows businesses below the threshold to operate without collecting GST/HST. However, voluntary registration can be beneficial even for small suppliers, because it allows you to claim Input Tax Credits (ITCs) on your business purchases. If your business expenses include significant GST/HST amounts (equipment, rent, supplies, software), the ITCs you recover may exceed the administrative burden of filing.
Charging and Collecting GST/HST
Once registered, you must charge the appropriate rate of GST/HST on all taxable supplies you make. Your invoices must include your GST/HST registration number, the amount of tax charged, and the total. For invoices under $100, simplified invoicing rules apply and you can show the tax-included amount rather than itemising the tax separately.
Not all goods and services are taxable at the standard rate. Zero-rated supplies (like basic groceries, prescription drugs, and medical devices) are taxable at 0% — meaning you charge no GST/HST but can still claim ITCs on related business inputs. Exempt supplies (like residential rent, most financial services, and certain health care services) are not subject to GST/HST at all, and you cannot claim ITCs on inputs related to exempt supplies.
Understanding whether your goods or services are taxable, zero-rated, or exempt is one of the most important aspects of GST/HST compliance. If you operate in the gig economy or provide digital services, use our self-employed tax calculator to see how GST/HST fits into your overall tax picture.
Input Tax Credits: Getting Your Money Back
Input Tax Credits are the mechanism that allows registered businesses to recover the GST/HST they pay on business purchases. When you buy supplies, equipment, software, or services for your business, the GST/HST you pay on those purchases can be claimed back on your GST/HST return.
To claim an ITC, you need proper documentation — typically an invoice showing the supplier's GST/HST number, the amount of tax paid, and a description of the goods or services. For purchases under $30, you need a receipt showing the total with a clear indication that GST/HST is included. For larger purchases, more detailed documentation is required.
Common ITCs for small businesses include: rent for commercial space, office supplies and equipment, professional services (accounting, legal), software subscriptions, vehicle expenses (business-use proportion), advertising and marketing expenses, and travel costs related to business. Our employer cost calculator can help you understand the total cost structure of your business including tax obligations.
Keep meticulous records. The CRA can disallow ITC claims if you cannot produce supporting documentation during an audit. Cloud-based accounting software that captures receipt images and links them to transactions is invaluable for maintaining your records.
Filing Your GST/HST Return
Your filing frequency depends on your annual revenue. Businesses with annual taxable revenues of $1.5 million or less typically file annually. Those between $1.5 million and $6 million file quarterly. Businesses over $6 million must file monthly. New registrants are initially assigned annual filing but can request a more frequent filing period if they prefer to receive their ITC refunds sooner.
Each return reports three figures: total GST/HST collected on sales, total ITCs claimed on purchases, and the net amount (either a remittance owing to the CRA or a refund owed to you). If you collected more than you paid, you remit the difference. If you paid more than you collected (common for businesses with high startup costs or significant export sales), you receive a refund.
Annual filers must remit any net GST/HST owing in quarterly instalments if the net tax for the preceding year exceeded $3,000. Instalment amounts are calculated by the CRA and communicated to you before each due date. Filing late triggers penalties of 1% of the amount owing plus 0.25% per month, up to 12 months — so timely filing is essential.
The Quick Method: A Simpler Alternative
For small businesses with annual taxable revenues under $400,000 (including GST/HST), the Quick Method offers a simplified filing approach. Instead of tracking ITCs on every purchase, you remit a flat percentage of your revenue to the CRA. The rate varies by province and business type — typically between 2.6% and 8.8% of revenue including tax.
The Quick Method often results in a small tax saving for service-based businesses with relatively low input costs. You also save significant time on bookkeeping since you do not need to track the GST/HST on every purchase. However, businesses with high input costs (retail, manufacturing) generally benefit more from the regular method because their ITCs are substantial.
Run the numbers both ways before choosing. Use our profit margin calculator to understand your cost structure and determine which method saves you more money. Once elected, you must stay on the Quick Method for at least one year, so choose carefully.