GST/HST is a sales tax applied to most goods and services made and supplied in Canada.
The GST is paid on taxable supplies of goods and services made from business and commercial activities.
Almost everyone pays the GST on purchases, and chances are if you have bought a good made and supplied to you in Canada, you have paid GST.
Generally, you pay GST to businesses that have registered to charge and remit this sales tax.
GST vs. HST: What’s the Difference?
The Goods and Services Tax is a Canadian federal government tax.
Provinces also apply the Provincial Sales Tax for goods and services purchased and sold.
Some provinces harmonize their sales tax with the GST, resulting in a harmonized sales tax (HST).
The provinces that apply the HST are New Brunswick, Ontario, Prince Edward Island, parts of Newfoundland and Labrador, and Nova Scotia.
As a business owner, if you are registered for GST, you are also registered for the HST.
Typically, you will need to charge and remit the HST for participating provinces and the GST for non-participating provinces.
Provinces that apply the harmonized sales tax offer a point-of-sale rebate for qualifying goods such as some types of books or children’s products.
How Much is GST?
The province you sell your goods or services in determines how much GST or HST you can charge.
There are certain goods and services with zero percent GST.
Examples of such goods are specific grocery and agricultural products, dairy products, some medical devices, prescription products, etc.
Businesses do not charge GST on zero-rated goods.
This means that as a consumer, when you purchase a product with 0% GST, you don’t pay any sales tax.
The applicable GST and HST rates by provinces and territories are:
- 5% GST for supply to cities in Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec, Saskatchewan, and Yukon,
- 13% HST for supplies to Ontario, or
- 15% HST if you supply goods or services to New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island
If a province does not apply the harmonized sales tax, you may need to pay the applicable provincial sales tax in addition to the federal goods and services sales tax.
You can calculate your GST or HST tax using a GST/HST tax calculator if you know the place of supply for your business’s goods and services.
GST/HST for New Businesses
Most businesses are required to have a GST or HST account and charge this sales tax on goods and services they supply in Canada.
However, if you are a small business with revenue under $30,000 in a calendar quarter and over the previous four consecutive quarters, you are not mandated to charge the GST or HST.
You can choose to voluntarily charge and remit the GST or HST provided that you do not sell exempt goods or services.
If you opt to register for a GST or HST account and remit sales tax, you will need to file GST/HST returns regularly and stay registered for at least one year.
You can register for a GST/HST account online, by mail, fax, or telephone.
After your registration, you will receive a GST/HST account number.
Usually, to register a GST account, you need a business number.
If you have previously incorporated your business, you will already have a business number; if not, you will receive a business number when you register your GST or HST account.
To reduce your business income tax, you may be able to claim the input tax credit.
The input tax credit is a credit that businesses can claim if they have paid GST or HST for purchases of qualifying goods used in the course of their business.
If your business provides goods or services exempt from GST or HST, you generally should not charge sales tax or claim the input tax credit (ITC).
However, you can claim the input tax credit if you paid GST or HST for purchases to provide a zero-rated good or service.
To claim GST/HST tax credits, you will need to file a tax return.
You can file a GST tax return electronically or through a paper tax return.
Frequently Asked Questions
- What is the meaning of GST in Canada?
The GST is simply a goods and services sales tax charged on most goods and services purchased and sold in Canada.