Which statement best describes an input tax credit under GST/HST?

• A. An input tax credit is a credit to recover GST/HST paid on business purchases
• B. An input tax credit is a separate tax rate
• C. An input tax credit is paid by employees
• D. An input tax credit applies only to international purchases

Answer: (A)

An input tax credit is a credit that a registered business can claim to recover the GST/HST paid on purchases and expenses that are used to make taxable supplies. This means when you file your GST/HST return, you subtract the ITCs you’re entitled to from the GST/HST you’ve collected on your sales, so you remit only the net amount to the government. It isn’t a separate tax rate and it isn’t paid by employees, nor is it limited to international purchases. ITCs apply to GST/HST paid on eligible business purchases used for taxable activities (with rules for personal use or exempt supplies, and sometimes partial ITCs for mixed-use items). For example, if you paid $2,000 in GST/HST on deductible business purchases and collected $10,000 on taxable sales, you would remit $8,000 after applying the ITC.