Input tax credits are an evidence problem, not a maths problem

An input tax credit — an ITC — is the mechanism that stops GST/HST compounding at every step of a supply chain. You charge tax on what you sell, you recover tax on what you buy, and you remit the difference. Only the final consumer bears it.

The arithmetic is subtraction. What actually costs businesses money is the part nobody describes as interesting: whether you can prove the claim.

What you have to hold#

The evidence requirements scale with the size of the purchase, and they are specific. For smaller amounts you need the supplier's name, the date, and the amount of tax. Above a threshold you also need the supplier's GST/HST registration number. Above a higher one you need the recipient's name and the terms of the sale as well.

The registration number is the requirement most often missing, because it is the one a supplier can forget to print. A credit-card slip showing a total is not enough on its own. Neither is a bank statement line — it proves you paid somebody, not what you bought or what tax was on it.

This is why "keep the receipt" is not filing advice but tax advice. The receipt is the claim.

You can check the format of a registration number against the official pattern for each program.

What is not fully recoverable#

Some tax you pay is not recoverable, or only partly:

• Meals and entertainment. The income-tax deduction is generally limited to 50%, and the ITC is restricted in the same proportion. Claiming the full tax on a client lunch is a common and easily-found error.
• Passenger vehicles are subject to the same capital cost ceiling that caps the deduction — you cannot recover tax on the portion above the limit.
• Club dues and membership fees for recreational facilities are generally denied outright.
• Personal use. Tax on the personal share of a mixed-use purchase is not recoverable, and the split has to be reasonable and supportable.
• Exempt supplies. If you make exempt supplies — most financial services, residential rent, many health and education services — you cannot claim ITCs on the inputs used to make them. This is the single biggest structural difference between exempt and zero-rated, and it catches businesses that assume "no tax charged" means the same thing in both cases.

Keeping it in the books rather than in a shoebox#

The reason ITCs become painful at filing time is usually that the tax was never separated when the bill was entered. If a $565 software bill is booked as $565 of software expense, the $65 of recoverable tax has been buried in an expense account, and finding it later means re-reading a year of invoices.

Booked properly, the recoverable tax goes to its own asset account as the bill is entered:

Account	Debit	Credit
6200 · Software	500.00
1310 · GST/HST Recoverable	65.00
2100 · Accounts Payable		565.00
Total	565.00	565.00

Do that consistently and the ITC figure on your return is a balance you read off the trial balance, not a number you assemble. The return becomes a reconciliation — does the balance in the recoverable account agree with what I am claiming? — rather than a research project.

The time limit#

Most businesses have four years to claim an ITC, counted from the due date of the return for the period in which it could first have been claimed. Larger businesses and some financial institutions get two.

Four years sounds generous, and it is, right up until a bookkeeping catch-up turns up a box of unentered bills from a period that has closed. The claim is usually still available — but the evidence has to be there, which brings the whole thing back to where it started.

Comma keeps the two sides in their own accounts as you invoice and enter bills, so what you collected and what you can recover are balances rather than a year-end reconstruction. If you are working out how often you have to file, the filing frequency tool covers the bands and when electing a shorter period is worth it.