Input Tax Credits Explained
How input tax credits recover the GST/HST you pay: the four conditions, documentation, partial use and time limits.
The short version
- An input tax credit (ITC) is how a GST/HST registrant gets back the GST/HST it pays on business purchases. You subtract your ITCs from the tax you collected, and remit the difference.
- You can claim ITCs only if you're registered, the purchase is for your commercial activities (making taxable or zero-rated sales), and you have the required documents.
- Purchases used for exempt sales (such as long-term residential rent) or for personal use don't qualify, or only partly.
- Most businesses have four years to claim an ITC. Missed ones can be added to a later return within that window.
- If you're not registered, you can't claim ITCs. The GST/HST you pay is just part of your cost (deductible for income tax).
Input Tax Credits Explained
GST/HST is designed so that businesses don't bear it; consumers do. Input tax credits are the mechanism. You collect tax on your sales, claim back the tax you paid on your costs, and send CRA the difference. Get the ITCs right and GST/HST is a pass-through. Miss them, and you're paying a sales tax nobody intended you to pay. Here's how they work.
How It Works on a Return
| Example: Ontario contractor, one quarter | Amount |
|---|---|
| Sales, before tax | $60,000 |
| HST collected (13%) (line 105) | $7,800 |
| HST paid on materials, fuel, tools, phone, accounting (line 108) (ITCs) | ($3,250) |
| Net tax to remit (line 109) | $4,550 |
If ITCs are larger than the tax collected (common when you have big start-up costs or mostly zero-rated export sales), the net tax is negative and CRA pays you a refund. The calculation, line by line, is on how to file a GST/HST return.
Are you claiming every ITC you're entitled to?
Upload or list your purchases. The SmartFile sorts eligible from ineligible ITCs, applies the 50% meal rule and personal-use splits, and checks your invoices meet CRA's documentation rules.
The Four Conditions
- You're a registrant when the tax was paid or became payable. (Some costs from just before registration can qualify, like inventory and capital property you still have.)
- The purchase is for your commercial activities: making taxable or zero-rated sales. Purchases for exempt sales or personal use don't qualify.
- You paid or owe the tax, and the supplier is registered (their tax was legitimately charged).
- You have the documents showing the information CRA requires for the purchase amount.
Documentation by Purchase Size
| Total purchase | The invoice or receipt must show |
|---|---|
| Under $100 | Supplier name, date, total amount |
| $100 to $499.99 | Plus the GST/HST charged (or that it's included), whether it's taxable, and the supplier's GST/HST number |
| $500 or more | Plus your name, a description of the goods or services, and the payment terms |
A card slip showing only a total isn't enough for anything over $100. CRA routinely denies ITCs without proper invoices in an audit. Records rules are on recordkeeping requirements.
Partial Use: Business and Personal, Taxable and Exempt
- Business and personal use (a phone, a home office, a vehicle): claim ITCs only on the business share, generally in the same proportion you use for income tax.
- Taxable and exempt sales together (a business that also rents out residential units): allocate ITCs on shared costs between them; only the taxable part qualifies.
- Capital property: special rules apply. For most equipment, an individual can claim the full ITC if it's used primarily (more than 50%) in commercial activities, and none otherwise; vehicles and real property follow their own rules.
What you can and can't claim, item by item, is on what can you claim as an ITC?
Time Limits
Most registrants can claim an ITC on any return filed by the due date of the return for the last reporting period ending within four years after the period in which the ITC could first have been claimed. Large businesses with mostly exempt sales and listed financial institutions have two years. Missed ITCs can simply be added to a later return within the window; you don't need to amend the old one.
Ways to Simplify
- Quick method: remit a set percentage of sales and skip ITCs on most operating costs (but still claim them on capital purchases). Good for service businesses with low costs; see the quick method.
- Simplified method: eligible small businesses can add up GST/HST-included purchases and multiply by a factor, instead of tracking the tax on each invoice.
If You Aren't Registered
Small suppliers who haven't registered can't claim ITCs. The GST/HST they pay is part of their business expenses for income tax; see business expense deductions. Big start-up costs are a good reason to consider registering voluntarily; see do I need a GST/HST number?
Back to the GST/HST guide, or see rates by province.
Input Tax Credit Questions
What is an input tax credit?
A credit that lets a GST/HST registrant recover the GST/HST paid on purchases used in its commercial activities, by subtracting it from the tax collected on sales.
Can I claim input tax credits if I am not registered?
No. Only GST/HST registrants can claim input tax credits.
How far back can I claim missed ITCs?
Most registrants have four years. You can include missed ITCs on a later return filed by the due date of the return for the last reporting period ending within four years after the period when the ITC first became available.
What receipts do I need to claim an ITC?
For purchases of $100 or more, the receipt must show the supplier’s GST/HST number and the tax charged. For $500 or more, it must also show your name, a description and the payment terms.
Can I claim ITCs on expenses I also use personally?
Only on the business portion, generally in proportion to business use.
Sources: CRA, Input tax credits; RC4022 General Information for GST/HST Registrants. Checked October 2026. The example is illustrative. Capital property ITC rules are summarized and differ for corporations, vehicles and real property.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.