HST/GST Guide for Small Businesses in Canada 2025

Updated March 2025 · 11 min read

Goods and Services Tax (GST) and Harmonized Sales Tax (HST) are consumption taxes that most Canadian businesses must collect on taxable sales and remit to the Canada Revenue Agency. Understanding your registration obligations, collection requirements, input tax credit claims, and filing schedules is essential for any Canadian small business owner. This guide covers everything you need to know for 2025.

GST vs. HST: What's the Difference?

Canada has both a federal tax (GST at 5%) and provincial taxes that vary by province. Some provinces have harmonized their provincial sales tax with the federal GST to create a single HST:

• HST provinces: Ontario (13%), New Brunswick (15%), Nova Scotia (15%), Prince Edward Island (15%), Newfoundland and Labrador (15%)
• GST + separate PST provinces: British Columbia (5% GST + 7% PST), Saskatchewan (5% GST + 6% PST), Manitoba (5% GST + 7% RST)
• GST only: Alberta (5% GST only — no provincial sales tax)
• QST provinces: Quebec has its own parallel system — 5% GST + 9.975% QST, both administered provincially

If you operate in HST provinces, you collect and remit HST as a single combined tax. If you operate in provinces with separate PST, you collect GST for the federal government and register separately for PST with the provincial government.

Who Must Register for GST/HST

You must register for GST/HST when your total worldwide taxable supplies (revenues from taxable sales) exceed $30,000 in:

• Any single calendar quarter (3-month period), OR
• The last four consecutive calendar quarters combined

Once you exceed the threshold in a quarter, you must register within 29 days. The obligation applies to sole proprietors, partnerships, corporations, and non-residents supplying in Canada.

Voluntary Registration

You can register voluntarily even before hitting $30,000. This is worth doing if you have significant business expenses that include GST/HST — you can claim Input Tax Credits (ITCs) to recover those taxes. Many startups and early-stage businesses register voluntarily to recover GST/HST on equipment, software, professional services, and other startup costs.

Exempt Persons (Small Suppliers)

Businesses with revenues under $30,000 are "small suppliers" and are exempt from mandatory registration. If you don't register, you don't charge GST/HST and can't claim ITCs on purchases.

What Is Taxable?

Taxable Supplies (Must Charge GST/HST)

Most commercial goods and services sold in Canada are taxable supplies. This includes: retail products, professional services, software and digital products, construction services, real property sales, and short-term accommodations.

Zero-Rated Supplies (Charge 0%, But Can Claim ITCs)

Zero-rated supplies are technically taxable at a 0% rate. You charge no GST/HST to customers but can still claim ITCs on inputs. Zero-rated categories include: basic groceries (unprepared food), prescription drugs, most medical devices, exports of goods and services outside Canada.

Exempt Supplies (Don't Charge, Can't Claim ITCs)

Exempt supplies are not subject to GST/HST. You don't charge it and you can't claim ITCs related to making these supplies. Exempt categories include: most financial services, most healthcare services, most educational services, long-term residential rents.

Input Tax Credits (ITCs)

An Input Tax Credit is a recovery of the GST/HST you paid on business purchases. If you buy $1,000 of office supplies and pay $130 in HST (Ontario), you can claim that $130 back from the CRA. This ensures you're only remitting tax on your value-added portion, not the full sale price.

To claim an ITC, you need:

• A valid receipt or invoice showing the supplier's name, invoice date, amount of GST/HST charged, and supplier's GST/HST registration number
• For purchases over $150: the recipient's name and a description of the goods/services must also be on the invoice
• The purchase must be used in your commercial activities (not personal use)

GST/HST Filing Periods

Your filing frequency depends on your annual taxable revenues:

• Annual revenues under $1.5 million: Annual filing (return due 3 months after year-end, or June 15 for sole proprietors with a December 31 year-end)
• Annual revenues $1.5–6 million: Quarterly filing
• Annual revenues over $6 million: Monthly filing

You can elect to file more frequently (quarterly instead of annually) if it helps your cash flow. Many small businesses prefer quarterly filing to avoid a large year-end lump payment.

The Quick Method of Accounting

The Quick Method is a simplified way for small businesses to calculate GST/HST remittances. Instead of tracking every ITC, you remit a fixed percentage of your total revenues (including GST/HST collected). Rates vary by business type and province.

The Quick Method is available to businesses with annual taxable revenues under $400,000. It reduces bookkeeping complexity but may result in slightly different (often lower) remittances than the regular method for businesses with high input costs. Consult your accountant to determine which method is better for your situation.

Common GST/HST Mistakes

• Missing the $30,000 threshold: Monitor your revenues monthly. Failing to register when required results in back-assessed GST/HST plus penalties and interest.
• Charging GST instead of HST (or vice versa): Know your customer's province of supply — the rate depends on where the supply is made, not where you're located.
• Missing ITC documentation: Keep every supplier receipt. Your credit card statement alone is generally not sufficient for ITC claims.
• Spending HST collected: GST/HST you collect from customers is not your money — hold it in a separate account until remittance is due.
• Missing the filing deadline: Late filing results in a penalty of 1% of the balance owing plus 25% of 1% per month, plus interest.

Managing HST/GST Cash Flow

The best practice: when you receive a payment that includes HST, immediately transfer the HST portion to a separate holding account. For example, if you receive $11,300 from a client for services in Ontario, transfer $1,300 to your HST reserve account immediately. The $1,300 belongs to the CRA — keeping it in your operating account creates the temptation to spend it and the risk of a cash shortfall at remittance time.