Taxes
What Is GST and HST? (Canada Explained)
What is GST and HST in Canada? Learn how these federal and harmonized sales taxes work, who charges them, and how they affect your sole proprietorship.
What is GST and HST? In Canada, both are consumption taxes: a business adds them to the price of most goods and services, collects the tax from the customer, and remits it to the Canada Revenue Agency (CRA). The goods and services tax (GST) is a federal tax that applies throughout the country. The harmonized sales tax (HST) is a single combined federal-provincial tax charged in provinces that have harmonized their provincial sales tax with the federal GST. If you run a sole proprietorship, these taxes sit on top of your income tax obligations, not inside them.
GST vs HST: what is the actual difference?
For a business, the two taxes work the same way. You register for a GST/HST account under your nine-digit Business Number (BN), charge the applicable tax on taxable supplies, report it, and remit it. The difference is geographic and administrative. In provinces that use HST, one combined tax is charged and a single remittance covers both the federal and provincial portions. In provinces that kept a separate provincial sales tax, you may need to register with the province as well as the CRA. Quebec administers its own QST through Revenu Québec alongside the GST.
Which provinces charge GST or HST?
The table below shows which tax generally applies, as of the current tax year. Rates change, so confirm the current rate for your province before you invoice.
| Province or territory | Tax generally charged | Notes |
|---|---|---|
| Ontario | HST | Combined federal and provincial tax |
| New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador | HST | Combined federal and provincial tax |
| Quebec | GST plus QST | QST administered by Revenu Québec |
| British Columbia, Saskatchewan, Manitoba | GST plus a separate provincial sales tax | Separate provincial registration may apply |
| Alberta, Yukon, Northwest Territories, Nunavut | GST only | No provincial sales tax |
Always check the current rate on the CRA website and with your provincial finance ministry, since governments can adjust rates and rules. Our guide to GST/HST rates by province explains how to confirm yours.
Do you have to register and charge GST/HST?
Not every sole proprietor must register right away. Under the small supplier rules, a business whose taxable revenue stays below a threshold set by the CRA generally does not have to register — confirm the current threshold on the CRA website, because it is reviewed periodically. Once you register, you charge tax on taxable supplies and can claim input tax credits. Voluntary registration is also possible before you reach the threshold, which lets you recover tax paid on business purchases.
Registration is generally expected when:
- Your taxable revenue exceeds the small supplier threshold.
- You provide taxi or ride-sharing services, where special rules may apply.
- You want to claim input tax credits on your business purchases.
- You choose voluntary registration to recover tax on start-up costs.
See small supplier status in Canada and do I need to charge GST/HST for more detail.
Input tax credits: recovering the GST/HST you pay
When you buy goods and services for your business, you usually pay GST/HST to your supplier. If you are registered, you can generally recover that tax by claiming input tax credits (ITCs) on your GST/HST return, provided the expense is for your commercial activity and you keep proper records. ITCs are separate from income tax deductions: a deduction reduces taxable income, while an ITC reduces the GST/HST you owe. Read input tax credits in Canada explained.
How GST/HST interacts with your income tax return
GST/HST is not income, and it is not reported as revenue on form T2125, Statement of Business Activities. If you are registered, you generally report business income net of the GST/HST you collected, and the tax you remit is not a deductible expense. Keep your GST/HST records separate from your income tax records so both filings reconcile. For details, see T2125 form explained.
Filing and remitting GST/HST
Registered businesses file a GST/HST return for each reporting period assigned by the CRA — typically annual, quarterly, or monthly, depending on your revenue and what you choose. You can file online through CRA My Business Account or with CRA-approved software, and any payment is due with the return. Money collected belongs to the government, so keep it separate from operating cash. Our guide on how to file a GST/HST return in Canada walks through the mechanics. This page is general information, not legal or tax advice; confirm current rules with the CRA or a qualified adviser.
Frequently asked questions
Is GST the same as HST?
No. GST is the federal goods and services tax, charged across Canada. HST is a single combined federal-provincial tax used in provinces that harmonized their provincial sales tax with the GST, such as Ontario and the Atlantic provinces. For a business the mechanics are the same: you charge the tax that applies to the supply and remit it through your CRA GST/HST account.
Do sole proprietors have to charge GST/HST?
Only once registered. Small supplier rules generally let a sole proprietor below the CRA's revenue threshold operate without registering, though voluntary registration is allowed and can let you claim input tax credits. If you register, you must charge GST/HST on taxable supplies, file returns, and remit the tax. Confirm the current threshold on the CRA website.
Can I claim back the GST/HST I pay on business expenses?
Generally yes, if you are registered for GST/HST. You claim input tax credits for the tax paid on goods and services used in your commercial activity, provided you keep records such as invoices showing the GST/HST. Personal expenses, and the personal portion of mixed-use expenses, are not eligible. ITCs are claimed on your GST/HST return, not your income tax return.
Does GST/HST go on my T2125 income tax return?
No. GST/HST you collect is not your income. If you are registered, you generally report business revenue on form T2125 net of the GST/HST collected, and the tax remitted is not a deductible expense. Income tax and GST/HST are separate filings with separate deadlines, so keep records that let both reconcile.