GST (Goods and Services Tax)
The GST is a 5% federal value-added tax applied to most goods and services sold in Canada. It applies nationwide and is collected by businesses at every stage of the production and distribution chain. Businesses with annual revenues exceeding $30,000 must register for a GST account with the CRA.
GST-registered businesses charge GST on their sales (output tax) and can claim credits for GST paid on their business purchases (input tax credits, or ITCs). This means only the end consumer effectively bears the full tax cost. Certain items are exempt (financial services, residential rent, health care) or zero-rated (basic groceries, prescription drugs, exports).
In provinces with HST (Ontario, Nova Scotia, New Brunswick, Newfoundland & Labrador, PEI), the GST is collected as part of the harmonized tax. In Quebec, the GST is collected alongside the QST by Revenu Québec. In BC, Saskatchewan, and Manitoba, the GST is collected separately from the provincial sales tax.
How it works
If your business earns more than $30,000 in annual revenue, you're required to register for a GST account and start charging GST on your taxable sales. Below that threshold you're considered a small supplier and registration is optional, though some small suppliers register anyway to claim input tax credits on their own purchases.
Registered businesses charge GST on what they sell and can claim input tax credits for the GST they paid on business purchases, so the tax effectively flows through the business without sticking to it. This is why, even though GST touches every stage of production, it's ultimately the end consumer who bears the full cost.
Not everything is treated the same way: exempt items like financial services, residential rent, and health care have no GST charged and no input tax credit claimed on related costs, while zero-rated items like basic groceries, prescription drugs, and exports are taxed at 0% but still allow the business to claim input tax credits on its costs.
Example: GST collected and remitted by a registered business
A registered business sells $10,000 of taxable goods in a period and charges 5% GST, collecting $500 from customers. During the same period it spends $2,000 on business purchases and pays $100 in GST on those, which it can claim back as an input tax credit.
At filing time the business remits the difference to the CRA: the $500 it collected minus the $100 input tax credit, for a net remittance of $400, rather than handing over the full amount it charged customers.
Frequently asked questions
Do I have to register for GST if I earn under $30,000?
No, businesses under the $30,000 small supplier threshold aren't required to register, though registering voluntarily can let you claim input tax credits on your own purchases.
What's the difference between exempt and zero-rated?
Exempt goods and services, like residential rent, carry no GST and the seller can't claim input tax credits, while zero-rated items, like basic groceries, are taxed at 0% but still let the seller claim input tax credits on their costs.
Who actually ends up paying the GST?
The end consumer bears the full cost, since registered businesses along the supply chain claim input tax credits on what they paid, leaving only the final sale to a non-registered buyer fully taxed.
Related Terms
HST (Harmonized Sales Tax)
HST combines the 5% federal GST with a provincial portion into a single harmonized tax, simplifying compliance for businesses operating in multiple provinces.
QST (Quebec Sales Tax)
The QST is Quebec's provincial sales tax at 9.
PST (Provincial Sales Tax)
PST is a provincial sales tax levied separately from the federal GST.
GST/HST Credit
The GST/HST credit is a tax-free quarterly payment from the CRA designed to help individuals and families with low and modest incomes offset the GST/HST they pay on everyday purchases.