GST/HST Input Tax Credits in Canada: What Small Businesses Can Claim

If your business is registered for GST/HST and buys goods or services for its commercial activities, you may recover eligible GST/HST through an input tax credit (ITC). You claim the credit on your GST/HST return, after the purchase meets the conditions, the records are sufficient, and the claim is still inside the time limit.

An ITC is a credit against GST/HST. It reduces the net tax you remit, or it increases a refund. An income-tax deduction is a different calculation: it affects taxable business income. One purchase can involve both, and the two amounts are not interchangeable.

British Columbia is a GST province, not an HST province. A Vancouver invoice commonly shows 5% GST. Provincial sales tax on that same invoice is a separate charge.

What purchases qualify for an input tax credit?

The CRA's ITC guidance requires you, in general, to be a GST/HST registrant during the reporting period, to have paid or become liable for the GST/HST, and to have acquired the property or service for consumption, use, or supply in your commercial activities. You also need the supporting documentation before you claim the credit.

Commercial rent, office supplies, professional fees, equipment, and the business-use portion of many vehicle costs can qualify. Eligibility still depends on the supply and how you use it. Exempt activities, personal purchases, and certain capital property follow tighter rules. Meals and entertainment are commonly limited to 50% of the GST/HST, in line with the income-tax restriction, although exceptions exist. A business label on a bank transaction is not enough.

For many registrants other than financial institutions, ordinary operating expenses used 90% or more in commercial activities may support a full ITC under the CRA's "substantially all" approach. Below that level, the usual result is a reasonable commercial-use percentage. Capital personal property, such as equipment recorded as a capital asset, is often tested on primary use, generally more than 50%, rather than on a simple percentage split. Passenger vehicles have their own restrictions. The software example below is an operating expense. It is not a template for a capital purchase.

If you were a small supplier immediately before you registered, the CRA may treat property you already hold for commercial use, such as inventory, capital property, and real property, as acquired when you register. The credit is based on the property's basic tax content. GST/HST on services that were supplied before registration does not qualify, even if you paid it afterwards. GST/HST on services to be supplied after registration, or on rent that relates only to the period after registration, can qualify. See when to register for GST/HST and review the opening balances before claiming earlier costs.

GST is not BC PST

A BC invoice may include 5% GST and provincial sales tax, often 7% where PST applies. An ITC recovers GST/HST. It does not recover BC PST. Record the two taxes separately, then consider PST under the provincial rules and the income-tax treatment of the cost. A zero-rated purchase has no GST/HST charged, so there is nothing to recover as an ITC. An exempt purchase has its own restrictions, including on the tax you paid to make that supply.

On a practical file, the first check is the supplier's invoice, not the bank feed. Split GST from PST, then ask whether the GST belongs to a commercial activity.

Example: a mixed-use subscription

Suppose a GST-registered Vancouver consultant buys an ordinary taxable software subscription for $1,000 plus $50 GST. The consultant documents that 80% of the use is commercial and 20% is personal. Assuming the general proportional rules apply, the invoice is complete, and no special restriction applies, the potential ITC is $40: $50 GST × 80% commercial use.

The $10 personal-use portion is not an ITC. Keep a short note of how the percentage was set, and revisit it when usage changes. Because commercial use is below 90%, this example does not use the substantially-all shortcut. Because the subscription is not capital personal property, it also does not use the primary-use test. A laptop bought as capital property, or a passenger vehicle, needs its own analysis.

If the consultant has $600 of GST/HST collected or collectible and $40 of eligible ITCs, the simplified net amount before other adjustments is $560. The return can include other credits and adjustments. Reconcile it to the books rather than posting one invoice and stopping there.

Which records should you keep?

Keep invoices, receipts, agreements, and proof of payment with a note of the business purpose and any allocation. The CRA's current chart uses three columns: a total sale under $100, a total sale of $100 to $499.99, and a total sale of $500 or more. The figure in those columns is the total amount paid or payable. The older $30 and $150 thresholds are no longer the general chart.

• Under $100: the supplier's business or trading name, or an intermediary's name; the invoice date or, if there is no invoice, the date the GST/HST is paid or payable; and the total amount paid or payable.
• From $100 to $499.99: the same information, plus the supplier's or intermediary's GST/HST registration number, the GST/HST amount or a statement that the amount includes tax at the applicable rate, and, where the document mixes taxable and exempt supplies, the status of each supply.
• $500 or more: the previous information, plus the buyer's name or trading name or the name of the buyer's agent, a brief description of the property or services, and the terms of payment.

The regulations include exceptions for certain records and transactions. Use the CRA's documentation table and fill gaps before claiming. A bank or credit-card statement often lacks the registration number, the tax amount, and the description. A consistent digital file, with the invoice attached to the ledger entry, makes a later review much easier.

How long do you have to claim an ITC?

Most registrants have four years, measured from the reporting period in which the ITC first became available. The claim has to be made on a return filed by the due date of the return for the last reporting period that ends within four years after the end of that reporting period. The count does not start on the invoice date.

A two-year limit applies to many listed financial institutions and to registrants whose threshold amounts exceed $6 million in both the current fiscal year and the preceding fiscal year. Charities, and persons whose supplies other than financial services were at least 90% taxable in either of the two preceding fiscal years, are carved out of that large-business rule. The two-year deadline is also measured differently: it uses the fiscal year that includes the reporting period in which the ITC first became available, then the return due date for the last reporting period ending within two years after that fiscal year.

Check the CRA's time-limit examples against your own reporting periods. If a credit was missed, identify when it first became claimable and whether the invoice still meets the documentation rules. For return timing, see the GST/HST filing deadlines guide and confirm that its year still matches the return you are filing.

What if you use the quick method?

The quick method changes the net-tax calculation. While it is in effect, the CRA says you cannot claim ITCs for operating expenses. You may still claim ITCs for certain purchases, such as land and property for which you can claim capital cost allowance, including computers and other equipment. Passenger vehicles keep their own restrictions. There is no dollar threshold that restores ITCs for ordinary operating expenses. Rates, eligibility, and the GST74 election are covered in the quick method guide.

Common mistakes to avoid

Each reporting period, compare the general ledger with the invoices. Correct a miscoded tax while the documents are still easy to find.

Frequently asked questions

Sources

• Input tax credits, Canada Revenue Agency, reviewed 2 November 2026.
• Input Tax Credit Information (GST/HST) Regulations, SOR/91-45, as amended, including the 2024 threshold changes.
• GST/HST Memorandum 8-1, General Eligibility Rules, for the substantially-all and capital-personal-property discussion.

Reviewed against CRA guidance on 2 November 2026. This is general information. Rules and circumstances change. Confirm the current CRA guidance and obtain professional advice before filing.