How to Calculate GST/HST Owed Correctly

Understanding GST/HST Basics

If you’re a small business owner in Canada, charging and remitting GST/HST is one of your key tax responsibilities.
But many entrepreneurs get confused about how to calculate what they owe — especially when juggling sales, expenses, and input tax credits.

Let’s make it simple.

GST (Goods and Services Tax) is a federal tax of 5%, while HST (Harmonized Sales Tax) combines GST with a provincial portion. The rate you charge depends on where your customers are located, not where your business is.

Here’s the general breakdown:

• GST (5%) applies in provinces like Alberta, BC, Saskatchewan, and Manitoba.

• HST (13–15%) applies in Ontario, New Brunswick, Nova Scotia, PEI, and Newfoundland and Labrador.

When You Need to Register for GST/HST

You must register for a GST/HST account with the Canada Revenue Agency (CRA) if your total revenue exceeds $30,000 in a 12-month period.
Below that amount, registration is optional — but even if you’re under the limit, registering can help you claim Input Tax Credits (ITCs) and look more professional to clients.

How to Calculate GST/HST on Sales

When you make a sale, you need to:

1. Determine the correct tax rate based on your customer’s province.

2. Multiply your sales amount by that tax rate.

3. Add that tax to your invoice total.

Example:
You sell a $1,000 service to a client in Ontario, where HST is 13%.

• GST/HST charged: $1,000 × 13% = $130

• Total invoice: $1,130

That $130 belongs to the CRA — not you. You’re simply collecting it on their behalf.

How to Calculate Input Tax Credits (ITCs)

If you’re registered for GST/HST, you can claim Input Tax Credits (ITCs) for the GST/HST you pay on eligible business expenses.
This helps you reduce how much you owe when you file your return.

For example:

• You paid $50 HST on office supplies.

• You can claim that $50 as an ITC against the HST you collected.

You’ll only pay the difference between the tax you collected and the tax you paid on business expenses.

Formula to Calculate GST/HST Owed

Here’s the simple formula most small businesses use:

GST/HST Collected – GST/HST Paid on Expenses (ITCs) = Net Tax Owed to CRA

Example:

• You collected $2,000 in HST from your clients.

• You paid $500 in HST on eligible business expenses.
  → You owe the CRA $1,500 ($2,000 – $500).

If the result is negative, it means you paid more tax than you collected — and you’ll get a refund or credit.

How Often You Need to File and Remit

Depending on your business size, you’ll file GST/HST returns monthly, quarterly, or annually.
The CRA will assign your filing frequency when you register.

Even if you have no sales in a period, you must still file a nil return to stay compliant. Late filings can lead to penalties and interest — something you definitely want to avoid.

Common Mistakes to Avoid

Many small business owners make the same errors when handling GST/HST:

• Charging the wrong rate for a customer’s province

• Forgetting to register after passing $30,000 in revenue

• Missing ITCs because of lost receipts

• Mixing personal and business expenses

• Paying late or missing deadlines

Keeping clean records and using separate business accounts (as mentioned in our previous article) can save you time and prevent CRA issues later.

✅ Final Thoughts

Calculating GST/HST owed doesn’t have to be stressful. Once you understand what to charge, how to track ITCs, and when to remit, it becomes part of your regular business routine.

If you’re unsure how to set up your GST/HST tracking or need help filing your return accurately, Tiki Tax can take care of it for you — so you can focus on running your business while staying fully compliant with the CRA.