The Canadian federal GST is like VAT in other countries. The three provinces of Ontario, New Brunswick and Newfoundland and Labrador harmonize the 8% sales tax with the 5% GST, creating a 13% harmonized sales tax, HST.

HST is a consumption tax paid by the consumer at the point of sale (POS). The vendor or seller collects the tax proceeds from consumers by adding the HST rate to the cost of goods and services. They then remit the total collected tax minus the HST paid on expenses by the business to the CRA.

Businesses collect HST on sales and remit the HST collected to CRA after subtracting the HST paid on expenses. HST return is filed as monthly, quarterly and yearly. HST is a tax on the final consumer, it is neither an income nor an expense but rather a liability for the business.  All of business income and expenses are reported net of HST. In simple terms, any HST paid by the business is recoverable.

Some supplies are exempt from the GST/HST – that is, no GST/HST applies to them. This means that you do not charge the GST/HST on these supplies and you are generally not entitled to claim input tax credits on such supplies.