Input Tax Credits (ITCs) Explained for Canadian Businesses

GST/HST is designed to be paid by the final consumer. Businesses pass it along: they collect tax from customers and get back the tax they paid on their own costs through input tax credits (ITCs).

How ITCs reduce your remittance

Net tax = GST/HST collected − ITCs

	Amount
HST collected on $40,000 of sales (13%)	$5,200
HST paid on $12,000 of expenses (13%)	−$1,560
Net tax to remit	$3,640

If your ITCs are larger than the tax you collected — common when you buy equipment or make zero-rated sales — you get a refund.

What you can claim

GST/HST paid on goods and services used in your commercial activities, such as:

• Inventory, supplies and materials
• Equipment, computers and software
• Rent for business premises, utilities and phone
• Advertising, professional fees and subcontractors
• Vehicle and fuel costs (business share)

For items used partly for personal purposes, claim only the business share.

What you can’t claim

• Purchases for personal use
• Costs of making exempt supplies (for example, long-term residential rent)
• Part of the GST/HST on meals and entertainment, which is generally limited to 50%
• PST, RST and QST — these are not GST/HST (QST registrants claim input tax refunds from Revenu Québec separately)

Records you need

Keep receipts and invoices that show the supplier’s details. For purchases of $100 or more, the invoice must include the supplier’s GST/HST number; for $500 or more, also your name and a description of the purchase.

Time limit

You generally have four years from the due date of the return for the period you made the purchase in to claim an ITC you missed.

ITCs and the Quick Method

Under the Quick Method, you don’t claim ITCs on everyday expenses — they are built into the lower remittance rate. You can still claim ITCs on capital purchases.

Try the GST/HST remittance calculator to see your net tax for a period.