GST/HST Net Tax Calculation
How GST/HST net tax is calculated, with three businesses worked from start to finish, timing rules and common adjustments.
The short version
- Net tax is the GST/HST you collected (or should have collected) on your sales, plus any increasing adjustments, minus the input tax credits (ITCs) you can claim, minus any decreasing adjustments.
- Positive net tax is what you pay CRA; negative net tax is a refund.
- Count tax that became collectible in the period, even if the customer hasn't paid yet. GST/HST is generally based on invoice dates, not cash received.
- Common adjustments: the 50% meals and entertainment ITC restriction, bad debts written off and recovered, personal use of business assets, and amounts you credited back to customers.
- Instalments and rebates claimed on the return come off after net tax to give the balance owing or refund.
GST/HST Net Tax Calculation
The GST/HST return asks one real question: how much tax did you take in, and how much did you pay out? The difference is net tax. The arithmetic is simple. What trips people up is what goes in each bucket and when. So here it is three ways, with three businesses worked from start to finish.
The Formula
| Step | Return line |
|---|---|
| GST/HST collected or collectible on taxable sales | 103 |
| Plus adjustments that increase tax | 104 |
| = Total tax and adjustments | 105 |
| ITCs on purchases for commercial activities | 106 |
| Plus adjustments that reduce tax | 107 |
| = Total ITCs and adjustments | 108 |
| Net tax = 105 minus 108 | 109 |
| Minus instalments and rebates | 110, 111 |
| = Balance owing or refund | 113 to 115 |
The full return is explained on how to file a GST/HST return.
Example 1: Ontario Consultant, Annual Filer
| Item | Amount |
|---|---|
| Fees to Ontario clients: $90,000 x 13% | $11,700 |
| Fees to an Alberta client: $10,000 x 5% | $500 |
| Line 105: tax collected | $12,200 |
| ITCs: laptop, software, phone (80% business), home office share, accounting | ($1,150) |
| ITCs: client lunches ($1,200 plus $156 HST, 50% claimable) | ($78) |
| Line 108 | ($1,228) |
| Line 109: net tax | $10,972 |
| Less instalments paid during the year | ($8,000) |
| Balance owing | $2,972 |
(The 50% meal rule is often handled as a full ITC during the year, then an adjustment on line 104 at year-end. Either way, the net is the same.)
Want your net tax worked out?
Upload your sales and purchase totals, or a bookkeeping export. The SmartFile sorts sales by rate, calculates eligible ITCs and adjustments, and gives you the numbers for every line of the return.
Example 2: Online Seller With Exports, Refund
| Item (quarter) | Amount |
|---|---|
| Sales to Canadian customers, $20,000 at mixed provincial rates | $2,100 tax collected |
| Sales to US customers, $45,000 (zero-rated) | $0 |
| Line 105 | $2,100 |
| ITCs on inventory from Canadian suppliers ($30,000 + 13% HST) | ($3,900) |
| ITCs on packaging, platform fees, shipping | ($900) |
| Line 108 | ($4,800) |
| Line 109: net tax | ($2,700) refund |
Exporters routinely get refunds, because they pay tax on their costs but charge 0% on most sales. Filing monthly or quarterly gets the refunds back sooner; see filing periods.
Example 3: Building With Commercial and Residential Units
| Item (year) | Amount |
|---|---|
| Rent from a ground-floor shop: $36,000 x 13% | $4,680 |
| Rent from two apartments upstairs: exempt | $0 |
| Line 105 | $4,680 |
| ITCs on shop-only costs (repairs to the shop) | ($520) |
| ITCs on shared costs (roof repair HST $2,600, shop is 40% of the building) | ($1,040) |
| Line 108 | ($1,560) |
| Line 109: net tax | $3,120 |
Only the commercial share of shared costs qualifies, because residential rent is exempt. See what can you claim as an ITC?
Timing: When Tax Goes in a Period
- Sales: tax is generally collectible on the earlier of the day you're paid and the day the invoice is issued (or should have been issued). Unpaid invoices still count.
- Purchases: claim the ITC in the period the tax was paid or became payable, or any later period within four years.
- Deposits: no tax until applied to the sale; see GST/HST on deposits.
- Customers who never pay: recover the tax through a bad debt adjustment; see GST/HST on bad debts.
Common Adjustments
| Adjustment | Effect |
|---|---|
| Meals and entertainment (50%) | Increases tax, if full ITCs were claimed during the year |
| Bad debt written off | Reduces tax (line 107) |
| Bad debt recovered | Increases tax (line 104) |
| Credit notes and refunds to customers | Reduces tax collected |
| Change in use of capital property (more or less business use) | Either way |
| Employee and shareholder benefits (vehicles) | Increases tax |
Using the quick method? The calculation is different; see GST/HST quick method. The basics of ITCs are on input tax credits explained.
Net Tax Questions
How do I calculate GST/HST net tax?
Add the GST/HST collected or collectible on your sales and any increasing adjustments, then subtract your input tax credits and any decreasing adjustments. The result is net tax on line 109.
Do I include tax on invoices that have not been paid?
Generally yes. Tax becomes collectible on the earlier of the day you are paid and the day you invoice (or should have invoiced), so unpaid invoices are included.
Why is my net tax negative?
Your input tax credits are larger than the tax you collected, which is common for exporters, businesses with large purchases and new businesses. A negative net tax is a refund.
Where do instalments go on the GST/HST return?
On line 110, after net tax. They reduce the balance owing for the period.
How do I handle the 50% meals rule?
Either claim only 50% of the GST/HST on meals and entertainment as ITCs, or claim it fully during the year and add back 50% as an adjustment at year-end.
Sources: CRA, Instructions for preparing a GST/HST return; RC4022 General Information for GST/HST Registrants. Checked October 2026. Examples are illustrative; real returns can include other adjustments not shown.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.