GST/HST can be a useful tax-planning tool for a small business. It allows eligible businesses to recover GST/HST paid on business purchases through input tax credits (ITCs). However, GST/HST is not always easy to manage. From my experience with client files, good records are the foundation. Without clear purchase and sales records, it becomes difficult to prepare an accurate return or support an ITC claim if CRA asks questions.
CRA requires GST/HST registrants to keep records that support the GST/HST they collect, pay, claim, or report. These records can be kept in an accounting system, an Excel file, scanned documents, paper records, or a combination of these. The important point is that the information is complete, organized, and available when needed.
Three areas to keep GST/HST records organized
Choose a simple record-keeping system
Choose a simple record-keeping system. A small business may use accounting software, Excel, or organized scanned documents. Free software, such as Wave, can be a practical cost-saving starting point for some businesses. Paid software, such as QuickBooks, may be useful when the business needs more features; I have worked with both Wave and QuickBooks. The best system is the one that is used consistently.
Keep a sales list for GST/HST collected
Keep a sales list for GST/HST collected. Keep a summary of invoices issued to customers. Separate the sales amount before tax, GST/HST charged, and total invoice amount. This gives a clear record of the GST/HST collected and helps avoid mixing sales revenue with tax collected.
Keep purchase documents and prepare an ITC list
Keep purchase documents and prepare an ITC list. Save invoices, receipts, and other purchase documents for expenses that relate to the business. Store scanned copies in a clear folder structure by year or month. Each document should support the purchase amount and the GST/HST claimed. An Excel list can make GST/HST preparation much easier. It may include the purchase item, vendor name, vendor GST/HST registration number, invoice number, amount before tax, GST/HST amount, and total amount. AI tools may help extract details from scanned invoices into a draft Excel list, but the business owner should review the results against the original invoice before using the list for a GST/HST return. CRA expects purchase invoices and receipts to contain the required information to support an ITC claim.
Practical tip — think about reporting periods early
- Annual filing may be easier for a new small business.
- Keep records organized throughout the year, even if you file annually.
- Eligible businesses can choose to file more frequently in the future.
- Aligning the GST/HST fiscal year with the corporation’s fiscal year can make recordkeeping and year-end work more straightforward.
Keep GST/HST records for at least six years from the end of the year they relate to. A simple, consistent system is usually more useful than a complicated system that is not maintained.
General note
This article is for general education only and does not replace advice for your specific situation. GST/HST registration, filing frequency, input tax credits, and recordkeeping obligations can depend on the facts and applicable tax rules.