How-to · Payroll and sales tax
How to record a GST/HST input tax credit
When a GST/HST registrant buys something for the business, record the GST/HST paid in its own account (an asset such as GST/HST Paid (ITC)), not as part of the expense. At filing time those input tax credits are subtracted from the GST/HST you collected, and you remit the difference or get a refund.
How-to guides / GST/HST input tax credit
The accounting behind it
GST/HST you pay on business purchases is recoverable, so it isn't a cost to you. Recording it separately keeps your expenses at their pre-tax amounts and gives you the input tax credit total for line 106 of the return.
The GST/HST you charge customers goes to GST/HST Payable (line 103). The return nets the two: tax collected minus ITCs is your net tax (line 109).
Only GST and HST are claimed this way. Provincial sales tax (PST in British Columbia, Saskatchewan and Manitoba) is part of the cost. QST in Quebec is claimed separately with Revenu Québec as input tax refunds.
| Account | Debit | Credit |
|---|---|---|
| Expense (pre-tax) | Price | |
| GST/HST Paid (ITC) | GST/HST | |
| Accounts Payable or Bank | Price + tax |
| Account | Debit | Credit |
|---|---|---|
| GST/HST Payable | Tax collected | |
| GST/HST Paid (ITC) | ITCs claimed | |
| Bank | Net tax remitted |
Worked example: an Ontario quarter
You buy $1,000.00 of supplies plus 13% HST, $1,130.00 in all. The $130.00 goes to GST/HST Paid (ITC). Over the quarter you collect $2,600.00 of HST and pay $900.00 of HST on purchases.
On the return, line 103 is $2,600.00, line 106 is $900.00 and line 109 is $1,700.00, which you remit.
| Account | Debit | Credit |
|---|---|---|
| Office Supplies | $1,000.00 | |
| GST/HST Paid (ITC) | $130.00 | |
| Accounts Payable | $1,130.00 |
| Account | Debit | Credit |
|---|---|---|
| GST/HST Payable | $2,600.00 | |
| GST/HST Paid (ITC) | $900.00 | |
| Chequing | $1,700.00 |
Common mistakes
- Leaving the GST/HST in the expense, so you never claim it.
- Claiming ITCs without the right invoice details (see below).
- Claiming PST or QST as a GST/HST input tax credit.
- Claiming tax on personal purchases or on the personal-use part of a mixed purchase.
In the US and in Canada
United States
The US has no equivalent. Sales tax you pay on business purchases is part of the cost of the item (or you buy tax-free for resale with a resale certificate).
Canada
The CRA's invoice rules (since April 20, 2021): for purchases under $100 you need the supplier's name, the date and the total. From $100 to $499.99 you also need the GST/HST charged (or a statement that the price includes it, with the rate) and the supplier's GST/HST registration number. At $500 and over you also need your name, a brief description and the terms of payment. Most registrants have four years to claim an ITC. If you are not registered, you can't claim ITCs, and the tax is part of the cost.
In AcboBooks
In the Canadian edition of AcboBooks 0.2.1, bills, cheques and card charges have a GST/HST column and post the tax to GST/HST Paid (ITC) automatically.
- Enter the purchase. In Vendors → Enter Bill, Banking → Write Cheques or Banking → Enter Credit Card Charges, type each line's amount before tax and pick the GST/HST rate in the GST/HST column. The tax shows as GST/HST (input tax credit) and posts to GST/HST Paid (ITC).
- Check the figures. At the end of the period run Reports → GST/HST Return for the line figures.
- Record the return. Go to Vendors → File GST/HST Return. Set Reporting period from and to and click Use this period's figures (or Claim all for the ITCs). Check Tax collected (line 103) and Input tax credits (line 106), choose the Receiver General (payee) and Pay from / refund to, and click Record GST/HST Return.
- File with the CRA. File the return itself in CRA My Business Account or GST/HST NETFILE using those figures. Quebec registrants file GST and QST with Revenu Québec.
PST, RST and QST are never defaulted into the GST/HST column, because they are not input tax credits.
Menu names are from AcboBooks 0.2.1. Not using it yet? Try it free for 15 days, with the sample company to practise on.
Questions
What is an input tax credit?
The GST/HST a registrant pays on business purchases, which it subtracts from the GST/HST it collected when it files its return.
Do I need the supplier's GST/HST number?
For purchases of $100 or more, yes. Under $100 the invoice only needs the supplier's name, the date and the total.
How long do I have to claim an ITC?
Four years for most registrants, ending at the due date of the return for the last period that ends within four years after the period the ITC could first be claimed. Some large businesses and financial institutions have two years.
Related how-to guides
Terms used here
- GST/HST filing guide
- PST, QST and RST guide
- GST/HST calculator
- Sales tax and GST/HST in AcboBooks
- Accounting software for Canadian businesses
Sources
Updated October 25, 2026. General bookkeeping information, not tax, legal or accounting advice. Rules differ by state and province and change over time; check with the IRS, the CRA or your accountant for your own situation.
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