GST/HST affects your small business cash flow by creating a timing gap between when you collect tax from customers and when you remit it to the CRA. If you're registered, you collect GST/HST on sales but don't keep that money, even though customers pay it upfront. Meanwhile, you can claim input tax credits on business expenses, which reduces what you owe, but the timing of these credits versus your remittance dates matters enormously for your bank account. Planning ahead for these payment obligations is critical to avoiding cash flow shortfalls that could disrupt payroll, inventory orders, or growth investments. When you charge GST/HST to customers, that money doesn't belong to your business. It's held in trust for the government. The longer the gap between collecting it and remitting it, the greater the pressure on your cash reserves.
No. GST/HST collected from customers is held in trust for the CRA and must be remitted according to your reporting cycle. Spending it on other bills creates a tax liability you can't cover, which can result in penalties and interest.
If your ITCs are larger than your collected GST/HST (common for businesses with high inventory purchases), the CRA may owe you a refund. This refund is processed during the CRA's review period and deposited to your business account, but it can take 4 to 8 weeks.
Your remittance frequency depends on your annual GST/HST liability and your business size. Most small businesses start on monthly or quarterly remittance. Contact the CRA or your accountant to confirm what frequency applies to you based on your expected tax liability.
If your revenue is below the registration threshold, you're not required to charge GST/HST, but you can still register voluntarily. This is a strategic decision that depends on your customer base and cash flow needs, so consult a tax professional about your specific situation.
Use accounting software that automatically calculates GST/HST on each transaction and categorizes ITCs. Review your GST/HST liability monthly even if you remit quarterly so you always know what you owe and can plan accordingly.