GST/HST instalments are quarterly payments that an annual GST/HST filer must make toward their next year's net tax. If your net GST/HST owing for a fiscal year was $3,000 or more, the CRA generally requires you to pay four equal quarterly instalments toward the following year, each due one month after the end of each fiscal quarter, instead of paying the whole amount when you file. The annual return then reconciles the instalments already paid against the actual net tax for the year. Income tax has a separate, parallel instalment system with its own thresholds.
Why it matters to Canadian contractors
- An annual filer who collects a year of HST and never sets it aside faces a large bill at filing. Instalments spread that obligation across the year.
- The CRA charges instalment interest, and in some cases a penalty, when required instalments are underpaid or late, even if you pay the full balance at filing.
- The $3,000 trigger is based on the prior year's net tax, so a single strong year can put you into mandatory instalments the following year.
- Forgetting instalments is a common cash-flow shock for contractors who graduated from small-supplier status into regular GST/HST filing.
Common mistakes and pitfalls
- Instalments apply to annual filers; monthly and quarterly filers already remit as they go and do not make separate instalments.
- The GST/HST instalment system is separate from income-tax instalments. Owing one does not mean owing the other, and the thresholds differ.
- Paying the full amount at filing does not avoid instalment interest if instalments were required and skipped.
- Instalments are an estimate toward the coming year; the annual return is where the true-up happens, so a refund or balance owing at filing is normal.
Related
This glossary entry is for general information only and does not constitute legal or tax advice. Canadian tax and construction law rules vary by province and contract. For advice specific to your situation, consult a licensed professional.