Let’s be honest for a second. When you decided to start your own business, you probably dreamed about creative freedom, being your own boss, or changing the world with your amazing product. I’m willing to bet you did not dream about the Goods and Services Tax.
Nobody does. GST, and its confusing cousin HST, feels like this giant, complicated beast lurking in the shadows, waiting to trip up new entrepreneurs. It’s a world of acronyms sent by the Canada Revenue Agency (CRA) to make our lives difficult. Or so it seems.
But what if I told you it’s not that bad?
Honestly. Once you pull back the curtain, the GST/HST system is… well, it’s still tax, so it’s not exactly fun, but it’s manageable. It’s a system with rules, and once you learn the rules, you can play the game. This guide is your rulebook. We’re going to walk through it all, step by step, without the soul-crushing government jargon you’ll find on canada.ca. Think of me as your accountant friend who’s explaining all this over a coffee.
Ready? Let’s untangle this thing.
What is GST in Simple Terms?
At its core, the Goods and Services Tax (GST) is a federal tax levied on the supply of goods and services at every stage of the production and sales chain. From the person who supplies the raw materials to the manufacturer, from the wholesaler to the retailer, and finally, from the retailer to you, the consumer. It’s a consumption tax, which is just a fancy way of saying it’s a tax on stuff people buy.
But here’s the magic trick, the thing that makes it different from a simple sales tax. It’s a “value-added” tax.
Imagine a wooden chair. The logger who sells the wood to the furniture maker charges GST on the wood. The furniture maker then builds a chair and sells it to a retail store, charging GST on the chair. The retail store then sells that chair to a customer, also charging GST.
It sounds like the government is taxing the same chair over and over, right? This is where the whole system could become a nightmare, a tax-on-a-tax-on-a-tax problem. They call this a cascade effect. To prevent this, the Government of Canada The government created a mechanism called the federal goods and services tax. Input Tax Credits (ITCs). We’ll get into the gritty details later, but the simple version is this: businesses get to claim back the GST they paid on their expenses.
So, the furniture maker gets a refund for the GST paid to the logger. The retail store gets a refund for the GST paid to the furniture maker. In the end, the only one who actually pays the tax without getting it back is the final consumer. The businesses are just acting as tax collectors for the government. It’s a flow-through system. That’s the big idea.
The Big Question: GST vs. HST vs. PST
Okay, here’s where most of the confusion starts. You hear all these acronyms thrown around—GST, HST, PST, QST—and it’s easy to get lost. They are all related to sales taxes, but they apply differently depending on which province or territory you’re in. Your jurisdiction matters. A lot of businesses are subject to GST.
Understanding the Federal GST
The Goods and Services Tax (GST) is the federal baseline. It’s a 5% tax rate that applies across the entire country. If a province doesn’t have its own integrated system, you just charge the 5% GST. It’s that simple. You’ll find this pure, 5% GST system in places like Alberta, where there is no The provincial sales tax is subject to GST.. It’s also the system in Yukon, the Northwest Territories, and Nunavut. The rules for this are laid out in the federal Excise Tax Act.
What is the Harmonized Sales Tax (HST)?
Years ago, some provinces got tired of businesses having to deal with two separate tax systems—the federal GST and their own provincial sales tax (PST). It was a headache. You had two sets of rules, two forms to fill out, two government agencies to send money to.
So, a few provinces decided to team up with the federal government and create a single, blended tax. This is the Harmonized Sales Tax (HST).
The HST combines the 5% federal GST with a provincial portion into one single rate. It’s administered entirely by the Canada Revenue AgencyBusinesses only have to deal with one agency and one set of rules for the federal goods and services tax. This is much simpler. If you’re in a province like Ontario, you charge a single HST rate of 13% (that’s 5% GST + 8% provincial tax). The same goes for the Atlantic provinces: Nova Scotia, New Brunswick, PEI, and Newfoundland and Labrador. They all impose the HST.
Provincial Sales Tax (PST) Explained
Then there are the provinces that decided to keep their systems separate. Provinces like British Columbia, Saskatchewan, and Manitoba have their own Provincial Sales Tax (PST) that operates completely independently of the GST. Businesses in these provinces have to be registered for, collect, and remit both the 5% federal GST and the provincial PST. This means dealing with two different government bodies and two different sets of rules about what’s taxable.
And then there’s the federal goods and services tax that applies to many transactions. Quebec. Quebec has its own version of a provincial tax called the Quebec Sales Tax (QST), which works a lot like the GST. It’s administered by Revenu Québec.
GST/HST Rates Across Canada: A Province-by-Province Breakdown
The most important thing is to know what rate to charge. This depends entirely on the “place of supply”—which is usually the province where your customer receives the good or service. So, if you’re an Ontario-based consultant doing work for a client in Alberta, you charge them the Alberta rate (5% GST), not the Ontario rate (13% HST).
Here is a breakdown of the federal goods and services tax rates. applicable The tax rates for GST with their provincial sales tax can vary significantly. every province and territory as of late 2025. Always check with the Department of Finance or the CRA for the most current rates, as they can change.
| Province/Territory | Type of Tax applies to goods and services provided in Canada. | GST Rate | Provincial Rate (PST/QST) | Total Sales Tax Rate |
|---|---|---|---|---|
| Alberta | GST | 5% | 0% | 5% |
| British Columbia | GST + PST | 5% | 7% | 12% |
| Manitoba | GST + PST | 5% | 7% | 12% |
| New Brunswick | HST | 5% | 10% | The federal goods and services tax is currently set at 15%. |
| Newfoundland and Labrador | HST | 5% | 10% | 15% |
| Nova Scotia | HST | 5% | 10% | 15% |
| Ontario | HST | 5% | 8% | 13% |
| Prince Edward Island | HST | 5% | 10% | 15% |
| Quebec | GST + QST | 5% | 9.975% | 14.975% |
| Saskatchewan | GST + PST | 5% | 6% | 11% |
| Northwest Territories | GST | 5% | 0% | 5% |
| Nunavut | GST | 5% | 0% | 5% |
| Yukon | GST | 5% | 0% | 5% |
Do I Need to Register for a GST/HST Number?
This is the million-dollar question for every new freelancer and small business owner. The answer is: it depends. You do not automatically need to register for a GST/HST account the moment you start your business. The CRA has a rule for this, and it’s called the “small supplier” rule.
The $30,000 Rule: Understanding the Small Supplier Threshold
In simple terms, you are a small supplier and do not have to register for GST/HST if your total worldwide revenues from taxable supplies of goods and services are $30,000 or less in any four consecutive calendar quarters.
Let’s break that down. It’s not about your net income; it’s about your gross revenue before expenses. It’s also not about a calendar year. It’s a rolling four quarters. That means you need to constantly be looking at your last 12 months of revenue to see if you’ve crossed the threshold. The moment your revenue hits $30,001 in a 12-month period, you are no longer a small supplier and you must register for GST/HST. Your effective date of registration is typically the day you made the sale that pushed you over the limit, and you have to start charging GST/HST on that sale. This is where a lot of people get caught off guard.
Exceptions to the Rule (e.g., Taxi Drivers)
Like any good tax law, there are exceptions. Some industries are required to register for GST/HST from their very first dollar of sales, regardless of the $30,000 threshold. The most common example is the taxi and ride-sharing industry (yes, that includes Uber and Lyft drivers). If you’re in one of these businesses, you need to register immediately.
How to Register with the Canada Revenue Agency (CRA)
So you’ve crossed the $30,000 threshold, or you’ve decided to register voluntarily (more on that in a sec). The process is actually pretty straightforward, especially for those familiar with the federal goods and services tax. You can register online through the CRA’s Business Registration Online service, by phone, by mail, or through your accountant to manage your GST with their provincial sales. You’ll get a Business Number (BN), and a specific GST/HST program account will be opened under that BN.
Why would anyone register before they have to? The answer is Input Tax Credits. If you don’t have a GST/HST number, you can’t claim back the GST/HST you pay on your business expenses. If you have a lot of startup costs—a new computer, office supplies, professional services—all that GST/HST you’re paying is just a cost. By registering voluntarily, you can get that money back as a refund. The downside is that you now have to charge GST/HST to your clients, which might make your prices less competitive if your clients are consumers who can’t claim it back. It’s a trade-off you need to assess.
How GST/HST Works for Your Business: Collecting and Remitting
Once you’re registered, your life changes a little. You are now an unpaid tax collector for the Government of Canada. Your job is to collect and remit the correct amount of tax.
The process is simple on the surface. You issue an invoice for your product or service, add the appropriate GST/HST rate on top, and collect the total amount from your customer. Then, at regular intervals, you have to send that tax money to the CRA. But before you send it all, you get to do something very important. You get to subtract the GST/HST you paid on your own business expenses. This is the magic of Input Tax Credits.
The Core Mechanic: Input Tax Credits (ITCs)
Input Tax Credits, or ITCs, are the heart of the GST system. They are the mechanism that allows you to recover the GST/HST you pay on purchases and expenses used in your commercial activities. The goal is to ensure that the tax only sticks to the final consumer.
Here’s a simple example. Let’s say you’re a freelance web designer in Ontario.
- You do a project for a client and charge them $2,000. You must add 13% HST, which is $260. The total invoice is $2,260, which may be subject to the federal goods and services tax. You have collected $260 in tax for the government.
- During that same period, you bought a new software subscription for $100 + 13% HST ($13) and paid your accountant $500 + 13% HST ($65) for helping with your tax returns. You have paid a total of $78 in HST on your business expenses.
When it’s time to file your GST/HST return, you don’t send the government the full $260 you collected. You calculate what you owe like this:
Total HST Collected: $260 Subtract Total ITCs: $78 ($13 + $65) Net Tax to Remit: $182
You send the CRA $182. To be eligible to You can claim input tax for purchases that are subject to GST. credits, you must have proper documentation, like receipts and invoices that clearly show the amount of GST/HST you paid and the supplier’s GST/HST number.
Filing Your GST/HST Return
The CRA will assign you a reporting period when you register. For most small businesses, it’s an annual filing period. As your business grows, you may be moved to quarterly or even monthly filing. You fill out a form called the GST/HST Return, which does the calculation we just described. If the amount you collected is more than the ITCs you’re claiming, you pay the difference. If you paid more GST/HST on expenses than you collected from sales (which can happen for new businesses with high startup costs, or in a slow quarter), the CRA will send you a refund.
Failing to file on time or remitting taxes late can lead to a stiff penalty and interest charges, so it’s critical to stay on top of your deadlines.
What’s Exempt? Goods and Services Not Subject to GST/HST
Not everything is subject to GST/HST. To make life complicated, the government has created two categories of things that are taxed at 0% but for very different reasons: zero-rated and exempt. Understanding the difference is critical for managing your ITCs.
Zero-Rated vs. Exempt Supplies: A Key Distinction
This is one of the most confusing parts of the whole system, but the distinction is really important.
- Zero-Rated Supplies (0% Tax): These are goods and services that are technically taxable, but the tax rate is set to 0%, making them tax-free. When you sell a zero-rated item, you don’t charge your customer any GST/HST. However, because it’s still considered a taxable supply, you can still claim Input Tax Credits for the GST/HST you paid on expenses related to providing it. This is a huge benefit. Common examples of zero-rated supplies include essentials such as groceries (basic ones, not junk food), prescription drugs, most medical devices, and many agricultural products. Most goods and services for export outside of Canada are also zero-rated.
- Exempt Supplies: These are goods and services that are not subject to GST/HST at all. You do not collect GST/HST when you sell them, but you also cannot claim any ITCs on expenses related to providing them. The GST/HST you pay on those expenses becomes a cost to your business. Common examples of exempt supplies include most healthcare services (like doctor and dentist visits), educational services, many childcare services, and long-term residential rent. This exemption is why your landlord doesn’t charge you GST on your apartment rent.
Common Examples (Groceries, Residential Rent, Medical Services)
- You buy milk and bread, which are typically tax-free in many provinces. Zero-rated. No GST paid at the checkout. The grocery store can claim ITCs on its expenses.
- You buy a bottle of vitamins: Taxable. You pay the full GST/HST.
- You pay your monthly apartment rent: Exempt. No GST is charged. Your landlord cannot claim ITCs for the GST paid on building repairs.
- You visit the dentist for a checkup: Exempt. No GST is charged on the service. The dentist cannot claim ITCs for the GST paid on their dental equipment.
GST/HST on Imported Goods and Services
The rules also apply to international transactions. When you import commercial goods and services, the GST is generally payable at the border on imported goods. This is handled by the Canada Border Services Agency (CBSA) at the point of importation. If you are a GST/HST registrant, you can usually claim an ITC for the GST you paid on those imported into Canada.
Conversely, most goods and services you export to customers outside of Canada are zero-rated. This means you don’t charge your international customers GST/HST, but you can still recover the GST/HST you paid on purchases used to produce those exports by claiming ITCs. This helps keep Canadian businesses competitive on the global market.
Frequently Asked Questions (FAQ)
What happens if I don’t charge GST when I should have? If you were required to be registered and failed to collect and remit GST/HST, the CRA can come calling. They will assess the amount of tax you should have collected, and you will be liable to pay that amount yourself, even if you never charged it to your customers. On top of that, they will add penalties and interest. This can be a very expensive mistake, so it’s crucial to monitor your revenue and register when required.
Can I claim a rebate on GST/HST for other reasons? Yes, there are various rebate programs available in specific situations. For example, there are rebates for employees and partners who have to pay for their own expenses, rebates on the construction of new housing, and rebates for public service bodies. There is related information and additional information available on the CRA website for these specific cases.
How does GST apply to online sales in different provinces? This is a complex area, but the general rule is the “place of supply.” You must charge the tax rate of the province where the good or service Sales tax applies to goods that are delivered or consumed within the province. If you sell digital products or services online from your office in Ontario to a customer in Saskatchewan, you need to charge them the Saskatchewan rate (5% GST), not the Ontario HST. New rules for the digital economy have made this even more complex, and it’s an area where getting professional advice is a very good idea. The rules for what may be subject It’s important to understand what is subject to tax and what is tax-free. may apply can be tricky.
The world of Goods and Services Tax can feel like a labyrinth. It’s a system built by bureaucrats and lawyers, and sometimes it shows. But it’s not an impossible code to crack.
By understanding the core concepts—the difference between GST and HST, the small supplier threshold, and the power of Input Tax Credits—you can transform this tax from a source of stress into a manageable part of your business operations. Keep good records, know your deadlines, and when in doubt, never hesitate to ask a professional. You got into business to do what you love. Don’t let a three-letter acronym get in your way.