How gst works
A business with taxable revenue over $30,000 in a single calendar quarter or over the past four consecutive quarters must register for a GST/HST account with the Canada Revenue Agency without exception. Once registered, it charges GST on taxable sales and can claim input tax credits for GST it paid on its own business purchases, recovering that cost rather than simply absorbing it as an expense.
In provinces that combine GST with provincial sales tax into a single harmonised tax, businesses charge HST instead of GST alone, reported together on the same return each period. In provinces without harmonisation, GST applies on its own, sometimes alongside a separate provincial sales tax charged and remitted independently on its own schedule and to a different authority entirely.
Example
An Alberta-based consulting firm registers for GST once its annual revenue passes $30,000, since Alberta charges GST only with no provincial sales tax layered on top of it. It invoices a client $10,000 plus 5 per cent GST, $500, for a total of $10,500. It also paid $210 GST on software subscriptions that quarter, which it claims as an input tax credit, so it remits $290 net GST to the Canada Revenue Agency for the period overall.
GST in QuickBooks Online vs Xero
QuickBooks Online applies province-specific GST, HST, PST and QST tax codes automatically once a business location is set, and produces a GST/HST return summary ready for review each period. Xero offers the same province-based sales tax codes and a GST/HST report the business or its accountant uses to file through CRA NETFILE directly.
Common mistakes
- A business crosses the registration threshold without noticing and keeps invoicing without charging GST, creating a liability it must cover after the fact.
- Input tax credits are not claimed on eligible business purchases, so the business absorbs GST as a cost instead of recovering it as allowed.
- Province-specific tax codes are applied inconsistently across transactions, leading to GST, HST, PST or QST being charged at the wrong combined rate.
Why it matters
GST registration and coding affect both what a business owes the Canada Revenue Agency and how much it can recover on its own purchases through input tax credits. Missing the registration threshold or misapplying tax codes creates liabilities that surface suddenly at filing time, straining cash flow. For Canadian business owners and their accountants, accurate GST coding throughout the period keeps the return simple and avoids unexpected remittances.
Related terms
How LedgerBPO handles gst
We apply the correct GST or HST code to every transaction based on province, reconcile the GST/HST control account each period and prepare the return figures for your review. Only a registered EFILE or NETFILE transmitter actually files the return with the CRA.