Running a business in Canada means keeping up with several administrative responsibilities, one of the most important being the HST (Harmonized Sales Tax) return. For many new or small business owners, this part can feel complicated at first. But once you understand when to file, how to calculate, and what steps to follow, it becomes a routine process that ensures your business remains compliant and penalty-free.
This article will guide you through when and how to File your HST Return in Canada, including filing deadlines, methods, and practical tips to help you stay on top of your obligations.
Understanding HST and why it matters
Let’s start with the basics before we dive into the filing process.
HST refers to the federal Goods and Services Tax combined with provincial sales tax in certain provinces. The federal government administers HST through the Canada Revenue Agency. For provinces where the HST is in effect, such as Ontario, Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland and Labrador, one harmonized rate of tax is charged on most goods and services.
Even if you are in a province that only charges GST, such as Alberta or British Columbia, the same process applies with regard to filing, but you will be remitting only GST.
The objective is simple: gather HST from your clients, set aside what is due to the CRA, and file your HST return correctly and on time.
When Should You Register for HST?
Not every business is obligated to register for the HST immediately. The CRA establishes what is known as a small supplier threshold to avoid unnecessary paperwork for very small businesses.
You must register for HST if your total taxable revenues exceed $30,000 in any single calendar quarter or over the last four consecutive quarters. Once your revenue passes this threshold, registration becomes mandatory.
If your earnings are below $30,000, you are considered a small supplier, and registration is optional. Some small businesses do choose to register voluntarily, though; this allows them to claim their ITCs the HST paid on eligible business expenses.
Once registered, you will be responsible for:
- Charging HST on all taxable supplies, both products and services.
- Maintaining records of the HST collected and paid.
- Filing your HST return within the due date.
When Do You File Your HST Return?
The frequency of your HST filings depends on the size of your business’s annual taxable revenues. The CRA assigns a reporting period when you register, but you can request to change it if needed.
Here’s a general breakdown:
- Annual filing: For businesses whose revenues are $1,500,000 or less.
- Quarterly filing: for businesses earning between $1,500,000 and $6,000,000.
- Monthly filing: For businesses with revenues over $6,000,000.
Filing Deadlines
- Monthly or Quarterly Filers: Your return and payment are due one month after the end of your reporting period.
- Annual Filers: The return is due three months after your fiscal year end but any balance owing must be paid within three months as well.
For example, if your fiscal year end is December 31, your HST payment is due by March 31, and your return must also be filed by that date.
How to File an HST Return — Step by Step
When your reporting period ends, it’s time to calculate and complete your return and file it. Let’s go through the process step by step.
Step 1: Gather Your Information
Before you start, have all relevant records in order. You’ll need:
- Total sales and revenues (including taxable, exempt, and zero-rated sales).
- Total HST collected from your customers.
- HST you paid on eligible business expenses for ITCs.
- Adjustments, such as bad debts, discounts, or returns.
This would be made much easier by keeping good bookkeeping all year round.
Step 2: Calculate the HST You Owe
Your net tax is the difference between the HST you collected and the HST you paid on business purchases.
Formula:
- Net Tax = HST Collected on Sales – HST Paid on Expenses (ITCs)
- If the result is positive, you owe that amount to the CRA.
- If it’s negative, you will receive a refund.
Example:
Let’s say your business collected $10,000 in HST from customers, and paid $3,000 in HST on supplies and operating costs.
Your net tax owing will be:
- $10,000 – $3,000 = $7,000.
That’s the amount you will remit upon filing your return.
Step 3: Fill out the HST Return Form
You can file your return using one of several CRA-approved methods. To use any of these methods, you must complete specific fields on your return:
- Total sales and other revenue (Line 101)
- HST collected or collectible (Line 105)
- Input tax credits (Line 108)
- Net tax (Line 109)
Should your ITCs be more than HST collected, you can claim a refund for the difference.
Step 4: File and Pay Your HST
You can file your return in one of the following ways:
- Online through My Business Account: this is the fastest and most convenient option for most business owners.
- Using GST/HST NETFILE: Suitable for those who file manually but want to submit electronically.
- By Mail: If you receive a paper form, you can fill it out and mail it to the address on the return.
- Through Your Bank: Some financial institutions allow electronic HST payments directly from your business account.
Ensure your payment reaches the CRA by the due date to avoid penalties.
Step 5: Keep Records for Six Years
After filing, it is your responsibility to keep all supporting records for at least six years, including invoices, receipts, and financial statements. The CRA may request these records at any time to verify or audit them.
Understanding Input Tax Credits (ITCs)
ITCs are one of the biggest advantages of being registered for HST. They allow you to recover the tax you paid on purchases used to operate your business.
Eligible ITCs include:
- Office supplies and equipment.
- Business utilities: internet, electricity, phone bills.
- Advertising and marketing expenses.
- Professional services such as legal or accounting fees.
- Rent or lease payments for commercial property.
Also, remember that the personal or mixed-use expenses may not be fully claimable. Always separate business use from personal use when calculating ITCs.
What Happens If You File Late?
Filing or paying your HST late results in a late-filing penalty and an interest charge. The CRA bases your late-filing penalty on the amount of HST that is owing and the number of days the amount remains unpaid.
For example, if you owe $5,000 and fail to file on time, your penalty may start at 1% of the balance owing plus an additional 25% of that amount for each month it remains outstanding (up to a maximum).
Interest is also charged daily on overdue balances. That’s why it’s crucial to file on time, even if you can’t pay the full amount immediately.
Common Mistakes to Avoid
Here are a few common HST filing mistakes that can easily be avoided:
- Missing the due date: Even one day late can result in interest charges.
- Mixing up zero-rated and exempt supplies. Zero-rated items (like basic groceries) are taxable at 0%, while exempt items (like residential rent) are not taxable at all.
- Claiming ineligible ITCs. Double-check that every expense is for business purposes.
- Failing to keep proper documentation. Without receipts or invoices, you can’t claim ITCs.
- Ignoring nil returns. Even if your sales are zero, you may still need to file a “nil” return to stay compliant.
Helpful Tips to Simplify HST Filing
Use accounting software: Modern tools such as QuickBooks or Xero will automatically track your sales and expenses, calculate HST, and even generate reports.
- File electronically. Filing online reduces errors and provides immediate confirmation.
- Set reminders. Mark due dates in your calendar or accounting software to avoid missing deadlines.
- Set aside HST funds separately. Keep collected HST in a separate account so it’s available when payment time comes.
- Consult a professional. If your business involves multiple provinces or complex transactions, an accountant can help ensure compliance.
Filing your HST return is an essential component of having a compliant and financially healthy business in Canada. Although it may initially seem complicated, once you understand when and how to file, this process is simplified substantially.
To recap, Register for HST once you exceed $30,000 in revenue. Identify your filing frequency: monthly, quarterly, or annually. Keep track of the HST you collect and pay. File on time, pay any amount owing and keep all records for six years. By keeping yourself organized and proactive, you will not only avoid penalties but also get a better idea of the financial health of your business. Filing your HST return isn’t just a legal requirement, it’s an opportunity to maintain transparency, build credibility, and ensure that your business thrives confidently within Canada’s tax system.
