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• August 20, 2025

5 Major Mistakes Small Business Owners Make in HST/GST Filing, and How to Prevent Them

Are you a Canadian small business owner who has more questions than answers related to your HST/GST filing compliance? Avoiding mistakes with the Harmonized Sales Tax (HST) or Goods and Services Tax (GST) are paramount to get right for compliance, but equally important for cash flow! Continue reading for expert thoughts, practical tips, the most recent CRA rules (as of December 2023), and actionable items to ensure that your business is “audit-proof” and penalty-free for 2025. For comprehensive guidance, check out our Canadian Tax & Accounting Training Program.

1.Failing to Register for GST/HST on Time

Many new businesses hope they can defer taking action related to GST/HST registration until necessary. The reality is that if your business’s taxable revenues exceed $30,000 in a period of four consecutive calendar quarters or in one calendar quarter you are required to register. If you exceeded this threshold and did not register, you would not have collected taxes, would owe penalties, and missed the opportunity to claim the relevant Input Tax Credits (ITCs).

How to Avoid:

• Track your revenue monthly/quarterly.
• If you anticipate exceeding the taxable revenues threshold, register early at the CRA Business Registration Online portal.
• Even if you are below the threshold, consider registering voluntarily to claims ITCs and if you ever exceed the threshold and have to register, you can do so without retroactive obligations.

2.Charging the Incorrect HST/GST Rate

When you have customers from multiple provinces, then you are responsible for charging the applicable rate based on the customer’s province, not your business location, or the province you live in. Several provinces are updating their HST rates in 2025 (e.g., Nova Scotia’s HST drops from 15% to 14% in April of 2025).

How to avoid it:

• Make sure to always confirm the HST/GST rate based on your customer’s province. For example:
• Ontario: 13% HST
• Alberta: 5% GST only
• Nova Scotia: 14% HST (as of April 2025)
• Stay on top of checking your provincial rate changes in accounting software and on invoices.

3.Missing Input Tax Credits or Lack of Documentation

Small businesses seem too often:

• Forget to claim eligible ITCs on business expenditures.
• Lack supporting receipts/invoices.
• Claim ITCs on unqualified personal expenditures or expenditures that do not have valid invoices.
  What you can do to avoid:
• Consider using accounting software (for example, QuickBooks) to keep track of GST/HST incurred on business expenditures.
• Keep all original receipts and invoices (both paper and digital) for at least 6 years.
• Only claim ITCs when the invoice is in your business name and is for an expenditure related to your business.

4.Filing Late or the Wrong Reporting Period

Filing late will typically bring automatic CRA penalties and interest, with CRA penalties likely to be at a much higher interest rate in 2025. Using the wrong reporting period (for example, quarterly instead of annually) is also a frequent audit trigger.

How can you avoid it?

• Use a compliance calendar with GST/HST deadlines into it and relevant to your filing frequency (for example, monthly, quarterly, annually).
• Use Electronic Filing using CRA My Business Account or certified software to ensure you are not missing a filing deadline. Electronic filing is now mandatory for most filers, and significant penalties for non-compliance.
• Make sure you double-check what reporting period you are assigned by CRA, and don’t forget to file, even where you have no income in the reporting period.

5.Weak record-keeping and data entry mistakes

Inconsistencies, disorder or incomplete records are common reasons for denied ITC claims, audits, and when you do not receive your refund. It’s easy to make the same mistakes repeatedly with weak controls in place, such as; wrong business number, missing invoices, entering expenses under incorrect company name, etc.

Things you should do to avoid it:

• Use cloud-based software for all sales and expenses
• Keep complete digital and physical files for at least 6 years.
• Train staff on data entry accuracy as well as monthly reconciliations.
• Always check your business number, name(s) and invoices before submitting your HST return.

Bonus Error: Failing to Charge HST/GST After You Have Registered

Even if your total sales slip below $30,000 but you are registered, you have to continue to charge HST/GST until you are deregistered with the CRA. You cannot just stop charging registration’s HST/GST unless you have deregistered.