GST/HST Registration and Filing for Small Businesses in Canada
Goods and Services Tax (GST) and Harmonized Sales Tax (HST) are administered by the Canada Revenue Agency under the Excise Tax Act. For most small businesses in Canada, understanding when registration is required, how collected tax is remitted, and how input tax credits reduce the net amount owed are the three most practical starting points.
The registration threshold
A business is required to register for GST/HST once its total taxable supplies exceed $30,000 in a single calendar quarter, or in four consecutive calendar quarters. This $30,000 is referred to as the "small supplier" threshold. Once the threshold is crossed, the business must register within 29 days.
The threshold applies to the total of taxable supplies from all commercial activities — not only those from a single product or service line. For a business that operates multiple revenue streams, all streams that involve taxable supplies are counted together against the threshold.
Voluntary registration is permitted even below the $30,000 threshold. A business that registers voluntarily can claim input tax credits on GST/HST paid on its purchases from the date of registration forward. This is often worth considering for businesses with significant startup costs that include taxable purchases.
Which supplies are taxable
Not all revenue is subject to GST/HST. Supplies fall into three categories:
- Taxable supplies — the general category; GST/HST is charged and collected, and input tax credits can be claimed on related purchases. The rate is 5% for GST provinces (Alberta, British Columbia, Manitoba, Quebec, Saskatchewan) and the applicable HST rate for participating provinces (Ontario at 13%, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador at 15%).
- Zero-rated supplies — taxed at 0%. GST/HST is not charged to customers, but the supplier can still claim input tax credits on purchases used to make these supplies. Common examples: most basic groceries, prescription drugs, medical devices, most agricultural products, and certain exports.
- Exempt supplies — GST/HST is neither charged nor is the supplier entitled to claim input tax credits. Examples include most residential rents, medical and educational services, and most financial services.
The distinction between zero-rated and exempt is significant: a business making only exempt supplies cannot register for GST/HST and cannot recover any GST/HST paid on its inputs. A business making zero-rated supplies can register and recover input tax credits.
How to register
Registration is completed through the CRA's Business Registration Online (BRO) system at canada.ca, by calling CRA's business enquiries line at 1-800-959-5525, or by mailing Form RC1 (Request for a Business Number). Registration assigns a Business Number (BN) and a GST/HST program account number in the format 123456789 RT 0001.
Collecting and accounting for GST/HST
Once registered, the business charges GST/HST on all taxable supplies it makes. The amount charged is determined by the province where the supply is made — the "place of supply" rules, which for most business services follow where the customer is located. For goods, the rules depend on where delivery occurs.
The tax collected from customers is not income. It is held on behalf of the Crown and remitted to the CRA on the applicable filing schedule. A common bookkeeping error is treating GST/HST collected as revenue or depositing it without tracking. Both create reconciliation problems at filing time.
Input tax credits
An input tax credit (ITC) is the mechanism by which a registered business recovers the GST/HST it paid on purchases used in its commercial activities. The net amount remitted to the CRA is the GST/HST collected on sales minus the ITCs the business is entitled to claim.
To claim an ITC, the business must hold adequate documentation. For purchases up to $30, no documentation beyond a receipt showing the amount is required. For purchases between $30 and $149.99, the supplier's name or trade name and the GST/HST registration number are also required. For purchases $150 and over, the same information plus a description of the property or service is needed.
Common examples of purchases on which ITCs can be claimed: supplies and equipment used in the business, professional fees (accounting, legal), vehicle operating expenses (at the business-use percentage), advertising, rent on commercial space, and telephone and internet services used for business.
Filing frequency
The filing period assigned at registration depends on annual taxable supplies:
- Annual filers — taxable supplies under $1.5 million per year; one return per year, with the option to make quarterly instalment payments
- Quarterly filers — taxable supplies between $1.5 million and $6 million per year; returns due within one month of each quarter end
- Monthly filers — taxable supplies over $6 million per year; returns due within one month of each month end
Most businesses starting out will be assigned an annual filing period. The CRA may change the filing period as revenue grows. A registrant can also elect to file more frequently than required, which can be useful if the business regularly has net refunds (more ITCs than tax collected) and wants to receive refunds sooner.
Filing deadlines
For annual filers whose fiscal year end is December 31, the GST/HST return is due by June 15 of the following year — but any net tax owing is due by April 30. The mismatch between the filing deadline and the payment deadline exists because most annual filers are also self-employed individuals whose personal tax return is due June 15, but whose tax payments are due April 30.
Late filing penalties apply as a percentage of the net tax owing: 1% for the first day, plus 0.25% for each additional day up to a maximum of 1 year, to a maximum of 25%. Interest at the prescribed rate compounds daily on unpaid amounts.
The quick method of accounting
Small registrants with annual taxable supplies under $400,000 may elect to use the Quick Method. Under this method, the business remits a flat percentage of its taxable revenue (including GST/HST collected) rather than tracking individual ITCs. The percentage varies by business type and province.
The Quick Method reduces bookkeeping complexity for businesses whose taxable purchases are relatively small relative to their taxable sales. It is not always advantageous — businesses with significant input costs often do better claiming actual ITCs. The CRA's RC4058 describes the method in detail.
Common compliance points
- Late registration — penalties apply from the date the business crossed the threshold, not the registration date
- Missing the quarterly instalment (for annual filers who choose to pay quarterly) — interest applies on shortfalls
- Claiming ITCs without adequate documentation — the CRA can disallow credits on audit if supporting documents are missing
- Misclassifying exempt supplies as taxable — results in tax charged and remitted on supplies where it should not have been collected, which may require adjustment
- Failing to update the filing-frequency election when taxable supplies increase — moving into a higher-revenue tier requires the CRA to assign a new filing period
Changes in registration status
A business that stops making taxable supplies, or whose taxable supplies fall below the $30,000 threshold for four consecutive calendar quarters, may cancel its registration. Cancellation does not eliminate the obligation to file final returns or to remit tax collected before the cancellation date.
A business that ceases operations must file a final return and remit all outstanding net tax, including any adjustments for ITC recapture or deemed supplies arising on the distribution of business assets.