How GST Works for Small Businesses in Canada

1. What Is GST in Canada?

The Goods and Services Tax (GST) is a 5% federal tax that applies to most goods and services sold or provided in Canada.
If you run a small business — whether you’re a freelancer, consultant, or shop owner — understanding how GST works is essential to staying compliant with the Canada Revenue Agency (CRA).

Depending on your province, GST may be combined with a provincial sales tax to form HST (Harmonized Sales Tax) — for example, in Ontario or Nova Scotia.
In other provinces like Alberta or British Columbia, you’ll collect GST separately from any provincial tax.

2. Do Small Businesses Need to Register for GST/HST?

Not every small business must register for GST/HST.
Here’s how to know if you need to:

✅ You must register if your total revenue (before expenses) is more than $30,000 in the last 12 months.
❌ You can choose not to register if your revenue is below $30,000 — this makes you a small supplier.

However, many businesses register voluntarily even before hitting that threshold. Why?
Because registering allows you to claim Input Tax Credits (ITCs) — meaning you can get back the GST/HST you paid on business purchases.

3. How to Collect GST from Customers

Once registered, your business must start charging GST or HST on all taxable sales.
You’ll need to:

1. Add GST/HST to your invoices — clearly showing the rate and amount.

2. Keep track of total tax collected from customers.

3. Separate your business income from collected tax in your accounting records.

💡 Example:
If you sell a $1,000 service in Alberta, you’ll charge 5% GST — that’s $50 in tax.
You collect $1,050 from your client but only $1,000 is your income; the $50 must later be sent to the CRA.

4. Claiming Input Tax Credits (ITCs)

The best part about registering for GST/HST is that you can recover the tax you paid on business expenses through Input Tax Credits (ITCs).

For example, if you paid GST on:

• Office supplies or software

• Equipment or tools

• Internet or phone bills

• Accounting or legal fees

…you can claim those amounts to reduce how much GST/HST you owe to the CRA.

💡 Tip: Keep every receipt that shows GST/HST paid — CRA requires proof for your ITC claims.

5. Filing and Paying GST/HST

Your business will have a filing frequency set by the CRA (usually annually, quarterly, or monthly).

When it’s time to file, you’ll calculate:
GST/HST collected – GST/HST paid on expenses = Amount owed or refundable.

For example:

• GST collected from clients: $5,000

• GST paid on business expenses: $1,500
  👉 You owe CRA $3,500.

If you paid more GST than you collected, the CRA will issue you a refund.

6. Common GST Mistakes Small Businesses Make

Avoid these errors that could cost you time or money:

❌ Forgetting to register after exceeding $30,000 in sales
❌ Mixing business and personal expenses
❌ Missing ITC receipts
❌ Filing late or missing payment deadlines
❌ Charging the wrong tax rate for your province

💡 Pro Tip: Always use accounting software or a professional tax preparer to manage your GST filings accurately.

7. How TiKi Tax Helps Small Business Owners

Managing GST/HST can be confusing — especially when you’re focused on running your business.
At TiKi Tax, we simplify the process by helping you:

✅ Register for GST/HST correctly
✅ Track and claim all eligible Input Tax Credits
✅ File your returns on time
✅ Avoid CRA penalties and errors

Our expert accountants make sure you stay compliant — while maximizing your tax efficiency.

8. Final Takeaway

Understanding how GST works helps your small business:

• Stay compliant with CRA

• Avoid penalties

• Maximize your tax savings

If you’re unsure about registration or filing, let TiKi Tax handle it for you.
We’ll make your GST process simple, accurate, and stress-free.