Introduction
Goods and Service Tax (GST) and Harmonized Sales Tax (HST) often confuse businesses and individuals alike. In this article, we’ll dive deeper to define the individual tax, draw key differentiators between them, and discuss how it affects the bottom line. As manipulations for small business owners, entrepreneurs, or just an interesting read on Canadian sales taxes, this article will give you detailed, pragmatic insights. We will discuss the definitions, registration requirements, filing procedures, and provincial specificities, to equip you with all the necessary information for choosing one tax system over the other.
H2: Understanding GST vs HST Basics
H3: What Is GST?
Most products and services in Canada receive a Goods and Services Tax (GST) which is under federal government control. The Canada Revenue Agency (CRA) enforces the GST which exists at a 5% rate. The federal government replaced its sales tax program with the GST system in 1991.
- Rate: 5% on taxable supplies
- Applicability: Nationwide, including provinces without HST
- Registration Threshold: Businesses with annual revenues over CAD 30,000 must register
For more details, visit the Canada Revenue Agency
H3: What Is HST?
Harmonized Sales Tax (HST) combines the 5% federal GST with a provincial sales tax (PST) into a single value-added tax. HST simplifies reporting because businesses remit one combined payment instead of separate federal and provincial filings.
- Rate Range: 13%–15%, depending on the province
- Applicability: Only in provinces that have harmonized their PST with GST
- Participating Provinces:
- Ontario (13%)
- Nova Scotia (15%)
- New Brunswick (15%)
- Newfoundland and Labrador (15%)
- Prince Edward Island (15%)
H3: Key Comparison Table
| Feature | GST | HST |
|---|---|---|
| Tax Components | Federal only (5%) | Federal + Provincial (13–15%) |
| Provinces Covered | All provinces and territories | ON, NS, NB, NL, PE |
| Filing Returns | Separate GST returns | Single HST return |
| Registration Threshold | CAD 30,000 annual revenue | CAD 30,000 annual revenue (combined) |
| Simplified Process | No PST component | No separate PST filings |
H2: Registration and Filing for GST vs HST
H3: Who Must Register?
Any business or individual whose taxable revenues exceed CAD 30,000 in a rolling 12-month period must register for either GST or HST, depending on the province of operation. Moreover, voluntary registration is possible if your revenue is lower.
- Threshold Criteria:
- Annual taxable supplies (worldwide) > CAD 30,000
- Includes associates and affiliates
- Registration Benefits (if revenue < CAD 30,000):
- Claim Input Tax Credits (ITCs) on business expenses
- Enhance business credibility
H3: How to Register for GST
- CRA Business Number: Obtain a Business Number (BN) online or by mail.
- GST Account: Add a GST account to your BN.
- Information Required:
- Legal business name
- Operating name (if different)
- Estimated annual revenue
- Registration Timeframe:
- Online registration: Immediate BN and GST account issuance
- Mail-in: 2–4 weeks processing
H3: How to Register for HST
- Business Number (BN): Same as GST—start by getting a BN.
- Add HST Program: Request an HST account under your BN.
- Province Selection: Specify the province of primary operations.
- Effective Date: Registration is effective on the first day of the month after application.
Tip: If your business sells in multiple provinces, register for HST in the province where most sales occur.
H2: Rates, Exemptions, and Input Tax Credits for GST vs HST
Comparing Tax Rates
- GST Rate: Flat 5% across Canada (excluding HST provinces).
- HST Rates by Province:
- Ontario – 13%
- Nova Scotia – 15%
- New Brunswick – 15%
- Newfoundland & Labrador – 15%
- Prince Edward Island – 15%
Note: Quebec charges separate QST (9.975%) plus GST (5%), not HST.
Exempt vs Zero-Rated Supplies
- Exempt Supplies: No GST/HST charged; no ITCs claimed.
- Examples: Most health, medical, and dental services; educational services; residential rent.
- Zero-Rated Supplies: Charge 0% GST/HST; can claim ITCs.
- Examples: Basic groceries; prescription drugs; exports.
| Supply Type | GST Treatment | HST Treatment |
|---|---|---|
| Basic Groceries | Zero-rated (0%) | Zero-rated (0%) |
| Prescription Drugs | Zero-rated (0%) | Zero-rated (0%) |
| Health Services | Exempt | Exempt |
| Residential Rent | Exempt | Exempt |
| Legal Services | Taxable (5%) | Taxable (varies by province) |
Input Tax Credits (ITCs)
ITCs allow businesses to recover GST/HST paid on eligible expenses. However, rules vary slightly between GST and HST regimes:
- Eligible Expenses:
- Office supplies
- Equipment rentals
- Utilities
- Professional services
- Claiming ITCs:
- Keep valid receipts showing GST/HST amount.
- Report in the GST/HST return under “Input Tax Credits.”
- Net ITCs against collected tax to determine net remittance or refund.
Example: A business pays CAD 1,050 (including CAD 50 GST) for office supplies. It can claim CAD 50 as an ITC.
H2: Provincial Nuances and Compliance
Provinces with HST
- Ontario (ON)
- Rate: 13%
- No separate PST.
- Nova Scotia (NS)
- Rate: 15%
- Combined PST into HST in 1997.
- New Brunswick (NB)
- Rate: 15%
- PST harmonized with GST in 1997.
- Newfoundland & Labrador (NL)
- Rate: 15%
- HST since 1997.
- Prince Edward Island (PE)
- Rate: 15%
- HST since 2013.
Provinces without HST
- British Columbia:
- GST (5%) + PST (7%) separately.
- PST provincial filings required.
- Alberta:
- GST only (5%). No PST or HST.
- Manitoba:
- GST (5%) + PST (7%) separately.
- Saskatchewan:
- GST (5%) + PST (6%) separately.
- Quebec:
- QST (9.975%) + GST (5%) separately.
- Register with Revenu Québec for QST.
Filing Frequency and Deadlines
- Annual Filing: If net tax (collected minus ITCs) < CAD 1,500 per year.
- Quarterly Filing: If net tax between CAD 1,500 and CAD 6,000.
- Monthly Filing: If net tax > CAD 6,000.
Deadlines:
- Monthly Returns: Last day of the following month
- Quarterly Returns: Last day of the month following quarter-end
- Annual Returns: Three months after fiscal year-end
Penalties and interest apply for late filings. Therefore, mark deadlines on your calendar.
Conclusion
The difference between GST and HST affects the methods for tax collection and reporting and the process of tax remittance in Canada. The federal GST sets a 5% standard tax rate while participating provinces apply HST which is 13% to 15% based on their specific tax rates. By identifying the correct tax jurisdiction for your firm and the products you sell you will achieve optimal compliance and receive maximum Input Tax Credit benefits.
If you operate in an HST province, register for HST and file combined returns to simplify reporting. Conversely, businesses in non-HST provinces must manage separate PST and GST filings. Whichever regime applies, accurate record-keeping and timely filing remain essential.
Ready to streamline your sales tax process? Contact us today for personalized guidance on GST vs HST compliance and enjoy peace of mind this fiscal year.