Introduction Goods & Services Tax (GST)
Harmonized Sales Tax (HST)

The Goods & Services Tax (GST)/Harmonized Sales Tax (HST) is a value added tax that became effective in Canada on January 1, 1991 and which replaced the then existing 13.5% Federal Sales Tax, a hidden tax on manufactured goods.

GST/HST is levied under Part IX of the Excise Tax Act. The rate of tax is currently 5% as of January 1, 2008, having been reduced from the original rate of 7% in 2 steps of 1% each.

Several provinces have integrated their provincial sales taxes with the GST into what is called the Harmonized Sales Tax or HST.

Those provinces are Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island and Ontario.

The HST rates vary by province from a low of 13% in Ontario, New Brunswick, Newfoundland and Labrador to 15% in Nova Scotia. The three territories of Yukon, Northwest Territories and Nunavut do not have any sales taxes so only the 5% GST has to be charged.

The province of Quebec administers both the federal GST and its own Quebec Sales Tax (QST). It is the only province to administer the GST which is otherwise administered by the Canada Revenue Agency (CRA).

Because GST/HST is a value added tax, only the ultimate end user consumer pays the tax. At every intermediate stage of processing (for goods) or for all services, the vendor (called supplier in GST/HST language) charges the GST on its sales and claims a reduction (input tax credit or ITC) for all GST/HST paid to its suppliers. So take as an example our Canadian tax law firm.

We charge GST/HST to our Canadian clients at the rate applicable in their province of residence and claim an ITC for all amounts of GST/HST we pay. We then send a payment to CRA for the difference. The same would be true of a manufacturer.

It would charge GST/HST to its customers and deduct input tax credits for GST paid. Sales outside of the country are not subject to GST/HST (see article here) so exporters are often entitled to a GST/HST refund. However tax refunds are now always subject to GST/HST audits

Want to Know about Goods and Services Tax and Harmonized Sales Tax? Click Here

Registration for The Goods & Services Tax (GST)/Harmonized Sales Tax (HST)

The threshold for GST/HST registration is $30,000 of annual sales. Any business that reaches this threshold amount is required to register and charge GST/HST for the year in which this sales amount is met.

Businesses with less than $30,000 of sales can elect to register for GST/HST in order to be eligible to deduct input tax credits. Failure to collect and remit GST/HST is a tax offence under the Excise Tax Act and is subject to tax prosecution and on conviction tax penalties of fines and jail terms.

GST/HST tax offences include filing a false or misleading statement under subsection 327(1) of the Excise Tax Act or failure to file a return under subsection 326(1) (Excise Tax Act).

Learn more about Us.


Zero Rated and Exempt GST/HST Sales

GST/HST is imposed on the supply (sale) of goods and services that are purchased in Canada, except for certain specific items that are either exempt or zero-rated. See the article here for details. For zero-rated sales, GST/HST is charged by the vendor at a zero rate so no GST or HST is actually collected. However, the vendor is eligible to claim an input tax credit for all amounts paid on purchases used in producing the goods or services. This effectively removes the value added tax from those specific goods and services. The most common zero-rated goods include groceries, prescription medication, inward/outbound transportation, and medical devices and certain exports of goods and services.

This contrasts with tax-exempt supplies where the sale is not subject to GST/HST and suppliers do not charge any tax on their exempt sales (rather than a notional zero percent tax charge). The big difference is that suppliers that make exempt supplies are not entitled to claim ITCs. Common GST/HST exempt items include legal aid services, health, and dental care, long term residential rents, financial services, educational services, day-care services, and music lessons.

Want to Know about Goods and Services Tax and Harmonized Sales Tax? Click Here

GST/HST Filing Requirements & Audits

GST/HST return filing requirements depend on the volume of sales and can be monthly, quarterly or annually. GST/HST audits are more common than income tax audits and most businesses can expect to have GST/HST auditors visit at some time. A refund claim is a guarantee of a GST/HST audit.

Director Liability for GST/HST

Directors of a corporation are personally liable for the unpaid GST/HST liability of a corporation unless they can demonstrate that they used due diligence in ensuring that the corporation tried to pay its GST/HST taxes owing. If the corporation is unable to pay its GST/HST taxes owing the director can expect a director liability assessment under section 323 of the Excise Tax Act.

GST/HST Objections and Appeals

A GST/HST assessment can be challenged by filing a Notice of Objection within 90 days of receipt of the GST/HST assessment or reassessment. If the 90 day objection deadline is missed there is a further 1 year to apply for an extension of time.

The time extension is discretionary and CRA does not have to grant it. If the results of a Notice of Objection are unsatisfactory there is a 90 day time window to appeal to the Tax Court of Canada. Again, if the appeal period is missed then an application for an extension of time can be made to the Tax Court itself. These extension applications are generally not granted unless there were exceptional circumstances outside of the control of the taxpayer.

Filing an Objection (or Tax Court appeal) does not suspend CRA collections actions, unless the situation with an income tax Objection or appeal. So CRA collections officers will continue to collect the GST/HST debt while the appeal is being processed.


????What are HST and GST, and what is their General Information? Click here to learn more.

FAQ’s: Goods & Services Tax (GST) Harmonized Sales Tax (HST)

If you’re flipping a house in Toronto, make sure not to miss out on all the deductions such as acquisition costs, legal costs, carrying cost of the property, material cost, home office expenses, and even advertising.
If you make more than $30,000 within four consecutive calendar quarters, you must register for a GST/HST account and, in turn, are required to file GST/HST remittances on a prescribed basis, either monthly, quarterly, or annually. To determine whether or not you hit the $30,000 threshold, you must include the total amount of all revenues (before expenses) from the sale of all your business’s global taxable goods and services.
Types of proof of one’s principal residence include utility bills with the occupant’s name and address, a driver’s license with the address, telephone listing, income tax, or a voter registration card.
If you do not file and pay your taxes when they were due, you will be charged interest and penalties by the Canada Revenue Agency. If you owe money and do not file your return on time, you will be charged a late-filing penalty. This penalty is currently 5% of the outstanding balance owing, plus 1% for each full month that your return is late, up to a maximum of 12 months. If you have filed late repeatedly, this penalty may crease to 10% of your balance owing, plus 2% for each full month, to a maximum of 20 months.
Currently, there’s no specific set of rules for online sales in Canada. The same rules apply to any transaction. If your business is in Canada or transfers taxable goods to Canada, you need to charge sales tax for online sales to customers located in Canada (GST or HST for all online sales).
If you are an individual with business income for income tax purposes and have a December 31 fiscal year-end, your return due date is June 15. However, your net tax remittance is due April 30.
As a general rule, goods exported outside of Canada and services rendered to non-residents are zero-rated under the GST/HST rules. This means that they’re technically taxable, but at a rate of 0%, you don’t have to charge anything.
The employee and partner GST/HST rebate is taxable income and must be included in income on line 10400 (line 104 before 2019) of your tax return for the year it is received.
To receive the GST/HST credit, you have to be a resident of Canada for tax purposes, and at least 1 of the following applies to you: Are 19 years of age or older; Have (or previously had) a spouse or common-law partner; or, Are (or previously were) a parent and live (or previously lived) with your child.
When you calculate the amount of GST/HST that you are considered to have collected on an automobile benefit, you must take into consideration the standby charge benefit, the operating expense benefit, and any reimbursements employees make in the year of these benefits.
Examples of taxable benefits that may have a GST/HST and QST implication include automobile benefits (i.e., standby and automobile operating charges), non-cash prizes and awards, holiday vacations, employee counseling services, uniform and special clothing, and board and lodging on a short term basis.
An automobile’s benefit is generally made up of a standby charge benefit, plus an operating expense benefit, minus any reimbursements employees make in the year for these benefits. The standby charge benefit and the operating expense benefit include GST/HST.
You are exempt from GST registration if you have a business that provides exempt supplies, which means that you don’t charge the GST/HST on these property and services supplies. You are generally not entitled to claim input tax credits on property and services acquired to provide these supplies.
Many services are exempt from GST, and these include used residential housing, residential rental accommodation, music lessons, medical and dental services, issuing insurance policies, educational services, most goods and services provided by charities, financial services such as fees for bank accounts, and lending, legal aid services, daycare services, and food and beverages.
The GST is a single federal sales tax rate of 5% that applies to purchases anywhere in Canada. However, many provinces charge an additional provincial sales tax (PST) on purchases. The Harmonized Sales Tax (HST) is not a new rate, but a combination of both GST and PST rates for collection purposes that has been adopted in some Canadian provinces.
A qualifying vendor (called a “supplier” for GST purposes) applies the GST/HST rate to the purchase price of qualifying sales made to customers. The customer is provided with the supplier’s GST registration number, typically on a receipt or invoice. The supplier is responsible for remitting GST/HST collected to the CRA on a periodic basis, the frequency of which is determined by the sales volume of the supplier.
GST/HST NETFILE is an online application that allows registrants to file their goods and services tax/ harmonized sales tax (GST/HST) returns. A registrant will access the online forms and enter the required information. After that, you will have to confirm that you want to file your information with the CRA.
There are other tax software that were approved for people to use in filing their returns. The list includes ReFILE, Auto-fill my return, and Express NOA services. Each software's approved year(s) can be found on the CRA website.
The CRA will assess your rebate claim, and you will be sent a notice of assessment through the mail in 'My Business Account.' The notice of assessment will contain the appraisal of your rebate and any changes made. To be eligible for a rebate, you should be a Canadian resident for income tax purposes, at least 19 years old, you have (or had) a spouse or common-law partner, and you are (or were) a parent and live (or lived) with your are (or were) a parent and live (or lived) with your child.