Input tax credits (ITCs): claiming GST/HST back

If you're registered for GST/HST, input tax credits are the mechanism that makes the whole system fair: you collect tax on sales, you pay tax on purchases, and you only remit the difference. Yet ITCs are also where a lot of small businesses quietly leave money on the table — or, in the other direction, claim credits that don't actually qualify and get flagged on review. Here's how ITCs really work.

What an input tax credit is

As a registrant, you charge GST/HST on your taxable sales and remit it to CRA. You also pay GST/HST on many things you buy to run the business — equipment, software, supplies, professional fees, even a portion of rent. An ITC lets you deduct the tax you paid from the tax you collected, so you remit only the net amount. If your ITCs exceed the tax collected in a period — common in a startup or a heavy investment year — the difference comes back to you as a refund rather than a bill.

What actually qualifies

The general rule is that the expense must be for use in your commercial activity — that is, in making taxable or zero-rated supplies — and you must be registered at the time the tax became payable. Purchases used to make exempt supplies do not generate ITCs, even though you paid GST/HST on them; that distinction is explained in full in our companion article on zero-rated vs exempt supplies. Where an expense has both business and personal use — a vehicle, a home office, a phone plan — only the business-use portion qualifies, and you need a reasonable, defensible method for splitting it.

The records CRA expects

An ITC claim is only as good as the paperwork behind it. At a minimum, CRA expects your records to show the supplier's business name, the date of the purchase, a description of what was bought, the total amount paid, and the amount of GST/HST charged (either shown separately or as a tax-included price with the rate clearly identified). The single most important item — and the one most often missing — is the supplier's GST/HST registration number. CRA's documentation expectations get more detailed as the size of the purchase increases, so keep every receipt and invoice, not just the large ones. This is precisely the discipline we build into bookkeeping for clients: capture the documentation once, correctly, and the ITC claim takes care of itself.

Common mistakes that cost real money

• Claiming ITCs on exempt supplies. If the purchase supports an exempt activity, no ITC applies, regardless of how much tax you paid.
• Claiming the personal-use portion of a mixed expense. Vehicles, home offices and phone plans need an honest business-use split, not a claim on the whole amount.
• Missing or invalid supplier GST/HST numbers. A claim without a valid supplier number is one of the fastest ways to have an ITC denied on review.
• Overclaiming meals and entertainment. A statutory limitation restricts how much of the GST/HST on meals and client entertainment can be claimed — confirm the current rule before claiming the full amount.
• Claiming before your registration date. Tax paid before you were validly registered generally isn't recoverable.
• Simply not claiming. Disorganized receipts mean legitimate ITCs quietly go unclaimed — this is the most common mistake of all, and the easiest to fix with better bookkeeping.

Time limits on claiming ITCs

ITCs aren't available forever. CRA imposes a time limit measured from the end of the reporting period in which the ITC first became claimable, after which the credit is simply lost. The exact limit depends on your filer type, so it's worth confirming the current rule with CRA or your CPA rather than assuming an old invoice is still fair game. The safest habit is to claim ITCs in the period the expense occurred, rather than stockpiling receipts to sort out later.

The bottom line

ITCs are one of the more mechanical parts of running a GST/HST-registered business, but mechanical doesn't mean automatic — you need the right documentation, the right classification, and the discipline to claim on time. We build ITC tracking directly into our online GST/HST filing service so nothing gets missed and nothing gets claimed that shouldn't be.

This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique — please speak with a CPA before acting on anything here.

About the author

Sunny Dhillon, CPA

Founder of EverStone CPA, an Abbotsford CPA firm, and a member of the Chartered Professional Accountants of British Columbia (CPABC). Sunny works with incorporated contractors and small business owners across Canada on tax, bookkeeping and advisory. More about Sunny →