Taxes
GST/HST Payable Explained (Canada)
GST/HST payable, or net tax, is what you remit after input tax credits. This guide shows how sole proprietors calculate, report, and pay it in Canada today.
Your GST/HST payable is the amount you owe the Canada Revenue Agency (CRA) once you have subtracted the input tax credits (ITCs) you are entitled to claim. On a GST/HST return, that bottom-line figure is called net tax: the GST/HST you collected on taxable supplies, plus or minus adjustments, minus eligible ITCs. If net tax is positive, you remit it; if it is negative, you generally claim a refund. For a sole proprietor this is a separate exercise from income tax and belongs on a GST/HST return, not on your T2125.
Why GST/HST payable is not your money
When you charge GST/HST to a customer, you are collecting tax on behalf of the federal government and, for the HST, the participating provinces. That money is not revenue and is never part of your business income. It is held in trust until you remit it. Treating collected tax as spendable cash is one of the most common cash-flow mistakes new sole proprietors make.
Because a sole proprietorship is not a separate legal entity, the responsibility for remitting GST/HST sits with you personally. Registering for a Business Number (BN) with a GST/HST account, charging the correct rate, and filing on time all fall to you.
How net tax is calculated
The return is essentially a short worksheet. You add up what you charged, subtract what you paid, and remit the difference. A simplified view looks like this:
| Item | Effect on net tax |
|---|---|
| GST/HST collected on taxable sales | Increases the amount you owe |
| Input tax credits on eligible business purchases | Decreases the amount you owe |
| Adjustments (bad debts, rebates, corrections) | Can increase or decrease |
| Net tax = GST/HST payable | Balance to remit, or refund to claim |
The mechanics matter less than the principle: only the net amount leaves your bank account. Everything you legitimately claim as an ITC reduces your GST HST payable.
What you must charge GST/HST on
You charge GST/HST on taxable supplies — most goods and services sold in the course of your business. Some supplies are zero-rated, meaning tax is charged at 0% but you can still claim ITCs, and some are exempt, meaning no tax is charged and no ITCs are available. The distinction depends on what you sell, not on who your customer is.
If you are a small supplier, you generally do not have to register or charge GST/HST. Once you exceed the small supplier threshold, or if you register voluntarily, you begin collecting. Confirm the current threshold on the CRA website before you decide, and see small supplier status in Canada for the full picture.
Input tax credits reduce what you pay
ITCs are the offsetting half of the system. When you buy goods or services for your business and pay GST/HST, you can generally claim that tax back as an input tax credit, provided the purchase was for business use and you have supporting documentation.
- Keep receipts showing the supplier's GST/HST number and the tax paid.
- Claim only the business portion of mixed-use expenses such as a vehicle or home office.
- Some expenses, such as certain meals and entertainment, are restricted.
- You cannot claim ITCs on exempt supplies or on personal purchases.
Read the full rules in input tax credits in Canada explained.
Choosing a reporting period and filing
The CRA assigns a reporting frequency — annual, quarterly, or monthly — based on your revenue and filing history. Returns are generally due shortly after the end of your reporting period, and any balance owing is due on the same date. Confirm your exact due date in CRA My Business Account rather than estimating it.
Two habits help you stay out of trouble: file even in periods when you have no tax to remit, and pay on time to avoid interest. The step-by-step process is covered in how to file a GST/HST return in Canada.
Rates, records, and common mistakes
The rate you charge depends on the province of the customer and the type of supply. Rates change, so confirm the current rate for your province before you invoice — see GST/HST rates by province.
Keep your records — sales invoices, purchase receipts, and filed returns — for the retention period the CRA requires, generally six years. If you realize you under-collected or over-claimed, correct it rather than ignoring it; adjustments are a normal part of the system.
Keep income tax and GST/HST in separate mental buckets. Your annual sole proprietor tax return reports profit, while your GST/HST return reports tax collected and ITCs. If you are unsure whether an item is taxable or claimable, or whether you need to register at all, check whether you need to charge GST/HST or speak with a qualified tax professional. This guide is general information, not tax advice.
Frequently asked questions
What does GST/HST payable mean on my return?
GST/HST payable is the net tax figure on your GST/HST return — the tax you collected on taxable supplies, plus or minus adjustments, minus the input tax credits you are entitled to claim. If the number is positive, you remit it to the CRA. If it is negative, you generally claim a refund or carry the amount forward. It is separate from your income tax owing.
How do I calculate net tax?
Net tax is GST/HST collected on taxable supplies, minus eligible input tax credits, plus or minus adjustments such as bad-debt recoveries. Most accounting software calculates this automatically from your invoices and receipts, but you remain responsible for the accuracy of the figures and for keeping the supporting documents. Confirm the current return instructions on the CRA website.
Do I still have to file if I collected no GST/HST?
In most cases yes — filing obligations continue even when no tax was collected. You may still be able to claim input tax credits on business purchases, which could create a refund. Filing a nil or refund return keeps your account in good standing and helps you avoid late-filing penalties. Check your assigned reporting frequency in CRA My Business Account.
What happens if my input tax credits are more than the GST/HST I collected?
The result is a net tax refund rather than a payment. You claim it on the return and the CRA generally pays it out, although the claim may be reviewed and you must have documentation for every ITC. Larger or unusual refund claims tend to attract more scrutiny, so keep receipts and records organized and easily retrievable.