GST/HST - Penalties and interest

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GST/HST – Penalties and interest

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Find out how and when penalties apply
Find out how and when interest applies
Find out how to cancel or waive penalties or interest

Find out how and when penalties apply

Penalties may apply in different situations.

Type of penalties for different situations
Type of penalty When it applies Amount charged
Failure to file Any return you file late unless you are in one of the following situations:
  • there is a $0 amount owing
  • we owe you a refund
 A + (B × C)

where:

A is 1% of the amount owing
B is 25% of A
C is the number of complete months the return is overdue, to a maximum of 12 months
Demand to file If you receive a demand to file and do not do so. $250
Failure to file electronically If you are required to file electronically and do not do so. For more information, see Mandatory electronic filing of the GST/HST return (GST34). $100 for the initial return not filed electronically.

$250 for each following return not filed electronically.
Failure to accurately report information For electronically filed returns, failure to accurately report information can include the following:
  • information that must be included, but was not
  • amounts (described further) that are over or under reported
  • amounts (described further) that are reported incorrectly

The amounts include all of the following:

  • recaptured input tax credits (RITCs)
  • resales of housing that are subject to the HST at 13% in Ontario, 15% in Nova Scotia, New Brunswick, Newfoundland and Labrador, or Prince Edward Island, where the housing was originally purchased on a grandparented basis
  • the transitional tax adjustment
  • provincial transitional new housing rebates
 Generally 5% of the amount plus 1% per month of the difference between what is reported and what should have been reported, until the amounts are corrected (to a maximum of 10%).

Note


You cannot claim an income tax deduction for any penalty paid or payable for failing to file a GST/HST return.

If you are a financial institution who is also required to file Form GST111, Financial Institution GST/HST Annual Information Return, there are additional penalties associated with failures to properly report information on that return. For more information, see Guide RC4419, Financial Institution GST/HST Annual Information Return.

Find out how and when interest applies

The Canada Revenue Agency (CRA) charges interest if you make late or insufficient payments. Depending on the debt, the interest charged is either arrears interest or instalment interest.

The CRA pays interest on an overpayment or refund of net tax claimed on a GST/HST return.

Arrears interest

The CRA charges arrears interest on:

  • any overdue balance owing on a GST/HST return
  • any other overdue GST/HST amount that you have to remit to the Receiver General

The interest rate is determined every three months in accordance with the prescribed interest rate compounded daily.

If you have an amount owing, you can view a revised balance that includes interest calculated to a date you select by using the "View and pay account balance" service and selecting the "Calculate future balance" option using:

Instalment interest

If the instalment payments you make are equal to one quarter of your net tax from your last fiscal year and you make those payments in full and on time, the CRA will not charge instalment interest, even if your net tax for the year is more than the instalments you made.

Interest on the part of any instalment payment that was not paid or that was paid late will be charged at the end of the fiscal year.

If you realize at any time during the fiscal year that you paid less than your required instalment payment or that you did not pay an instalment on time, you can reduce or eliminate your instalment interest by overpaying your next instalment payment or by paying it early.


Example - Instalment interest


Your net tax for the 2015 fiscal year was $4,000. You estimate that your net tax for 2016 will be $3,200. You choose to make quarterly instalments of $1,000 each based on your 2015 net tax and you paid each one by its due date.

At the end of 2016 you calculate your net tax and it is actually $5,500. Since your 2016 instalment payments were equal to one quarter of your net tax for 2015 you will not be charged instalment interest. You have to pay the balance of $1,500 by the due date for your net tax for the fiscal year.


Example - Instalment interest


Your net tax for the 2015 fiscal year was $4,000. You estimate that your net tax for 2016 will be $3,200. You choose to make quarterly instalments of $1,000 each based on your 2015 net tax and you paid each one by its due date.

At the end of 2016 you calculate your net tax and it is actually $5,500. Since your 2016 instalment payments were equal to one quarter of your net tax for 2015 you will not be charged instalment interest. You have to pay the balance of $1,500 by the due date for your net tax for the fiscal year.


Example - Instalment interest


Your net tax for the 2015 fiscal year was $4,000. You estimate that your net tax for 2016 will be $3,200. You choose to make quarterly instalments of $1,000 each based on your 2015 net tax and you paid each one by its due date.

At the end of 2016 you calculate your net tax and it is actually $5,500. Since your 2016 instalment payments were equal to one quarter of your net tax for 2015 you will not be charged instalment interest. You have to pay the balance of $1,500 by the due date for your net tax for the fiscal year.

Instalment interest is calculated beginning the day after the instalment payment was due and ending on the earlier of the following dates:

  • the day the overdue instalment amount and any accrued interest is paid
  • the day your net tax owing for the year is due (although interest still applies if there is an overdue balance on your GST/HST return).
Example

Your net tax for the 2020 fiscal year was $4,000. You estimate that your net tax for 2021 would be $3,200. You chose to make quarterly instalments of $1,000 each based on your 2020 net tax and you paid each one by its due date.

At the end of 2021 you calculated your net tax and it was actually $5,500. Since your 2021 instalment payments were equal to one quarter of your net tax for 2020 you will not be charged instalment interest. You have to pay the balance of $1,500 by the due date for your net tax for the fiscal year.

Refund interest

The CRA will pay you interest, compounded daily, on an overpayment or refund of net tax claimed on a GST/HST return beginning from the later of:

  • 30 days after the day you file the return in which you claim the refund
  • 30 days after the day after the end of the reporting period that is covered by that return
  • the date of the payment that created the overpayment

The calculation of interest we pay ends on the day the refund is paid or applied. The interest rate is determined every three months in accordance with the prescribed interest rate compounded daily.

Find out how to cancel or waive penalties or interest

The CRA administers legislation that gives the Minister of National Revenue discretion to cancel or waive penalties or interest. This legislation is commonly called the taxpayer relief provisions.

For more information, see Cancel or waive penalties or interest.


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Date modified:
2023-06-27