What is an input tax credit or ITC for GST?
When preparing my GST, I see reference to ITCs — what are they?
Input tax credits (ITCs) are the GST/HST paid on a business's operating expenses. Deduct the total ITCs paid during the year on operating expenses from the total GST/HST collected in the year to determine your total GST tax payment owing.
GST payable for a business is determined as follows:
GST payable = GST collected on sales - GST paid on expenses*
*GST paid on expenses are the ITCs
If your business is registered for the GST quick method, you don't need to worry about ITCs as GST owing is calculated as 3.6% of total sales (including GST) with a 1% ITC credit on the first $30,000 annually.