What Is GST/HST and How Does It Work for Canadian Small Businesses?
Updated: Sep 9
If you run a small business in Canada, GST/HST is one of the most important financial obligations you need to understand.
Yet for many business owners — especially those just starting out or those who have been operating without proper bookkeeping — GST/HST remains confusing, easy to mistrack, and surprisingly easy to get wrong.
This article explains what GST/HST is, how it works, when you are required to register, and how to stay on top of it without stress.
What Is GST/HST?
GST stands for Goods and Services Tax. HST stands for Harmonized Sales Tax. Both are consumption taxes collected by businesses on behalf of the federal government and remitted to the Canada Revenue Agency (CRA).
The key thing to understand is that GST/HST is not your money. When a client pays you an invoice that includes GST/HST, that tax portion belongs to the CRA from the moment it is collected. Your job is to hold it and remit it on schedule.
Current rates by province:
Province | Tax Type | Rate |
British Columbia | GST + PST | 5% GST + 7% PST |
Ontario | HST | 13% |
Alberta | GST only | 5% |
Quebec | GST + QST | 5% GST + 9.975% QST |
Nova Scotia | HST | 15% |
New Brunswick | HST | 15% |
Prince Edward Island | HST | 15% |
Newfoundland & Labrador | HST | 15% |
Manitoba | GST + RST | 5% GST + 7% RST |
Saskatchewan | GST + PST | 5% GST + 6% PST |
Note: PST, RST, and QST are provincial sales taxes administered separately from GST. This article focuses on GST/HST which is administered by the CRA.
When Do You Need to Register for GST/HST?
You are required to register for GST/HST when your business revenue exceeds $30,000 in a single calendar quarter or in four consecutive quarters. This threshold is called the small supplier limit.
Once you cross that threshold, you must register within 29 days and begin collecting GST/HST on your taxable supplies.
You can also register voluntarily before reaching $30,000 — and for many small businesses, doing so is worth considering because it allows you to claim Input Tax Credits (ITCs) on your business expenses.
Key Takeaway GST/HST you collect is never your money. It belongs to the CRA from the moment a client pays you. Your job is to track it carefully and remit it on time.
A Side-by-Side Comparison
Here is a simple way to think about how the two roles differ:
Bookkeeper | Accountant | |
Focus | Day-to-day transactions | Year-end and strategy |
Frequency | Ongoing throughout the year | Periodically or at year-end |
Main output | Accurate, current books | Tax returns, advice, planning |
Tax filing | GST/HST tracking and remittance | T2 corporate return, T1 personal |
Cost | Monthly retainer or hourly | Hourly or project-based |
CRA contact | Routine compliance support | Audits, disputes, rulings |
How GST/HST Actually Works
Here is the basic flow:
You collect GST/HST from your clients
When you invoice a client for a taxable supply, you add GST/HST to the invoice. In BC for example, if your service fee is $1,000, you charge $1,050 ($1,000 + 5% GST). The client pays you $1,050. The $50 belongs to the CRA.
You pay GST/HST on your business expenses
When you pay for business expenses that include GST/HST, that tax is called an Input Tax Credit (ITC). You can claim ITCs to offset the GST/HST you owe to the CRA.
You remit the difference to the CRA
When you file your GST/HST return, you calculate:
Net tax owing = GST/HST collected − Input Tax Credits (ITCs)
If you collected more than you paid, you remit the difference to the CRA. If you paid more than you collected, the CRA owes you a refund.
Filing Frequency
How often you file depends on your annual revenue:
Annual revenue under $1.5M → Annual filer (due with your income tax return)
Annual revenue $1.5M – $6M → Quarterly filer (due within one month of quarter end)
Annual revenue over $6M → Monthly filer (due within one month of month end)
Most new small businesses start as annual filers. As revenue grows, the CRA may move you to quarterly or monthly filing.
Common GST/HST Mistakes to Avoid
Spending the GST/HST you collect
This is the most common and painful mistake. The GST/HST in your bank account is not available cash — it is a liability. Set it aside in a separate account the moment it is received.
Missing a filing deadline
Late GST/HST remittances carry penalties and compound interest. Set calendar reminders for every filing deadline well in advance.
Not tracking ITCs properly
Every time you pay GST/HST on a business expense, you are entitled to claim it back as an ITC. If you are not tracking these, you are overpaying the CRA. Good bookkeeping captures every ITC automatically.
Charging GST/HST before registering
You cannot legally collect GST/HST from clients until you have a GST/HST number. If you collect it before registering, you are required to remit it even though you cannot yet claim ITCs. Register first.
Key Takeaway The best way to stay on top of GST/HST is to keep your books current. When every transaction is correctly categorized throughout the year, your GST/HST return is simply a matter of running a report — not reconstructing months of transactions.
Final Thoughts
GST/HST does not need to be stressful. When you understand how it works, set money aside from the moment it is collected, and keep your books current throughout the year, it becomes a straightforward part of running your business.
The problems arise when GST/HST is not tracked, not set aside, or not filed on time. All of those problems are preventable with good bookkeeping habits.
If you are not sure whether your GST/HST is being tracked correctly, that is exactly the kind of thing a bookkeeper can help you sort out.
Continue Reading
Curious About Your Financial Health?
Take our free Business Health Scorecard and discover how your business is performing in four critical areas:
Cash Flow & Bookkeeping
Profitability
Tax Readiness
Financial Systems
Know Your Numbers. Grow With Confidence.
© 2026 Golden Star Bookkeeping. All rights reserved.
Comments