How to Claim Input Tax Credits (ITCs) on GST/QST and Maximize Refunds — Montreal CPA

For every dollar your business spends, GST and QST quietly accumulate in the background — on rent, software, advertising, equipment, subcontractors, shipping, and even office supplies. Most entrepreneurs don’t realize that this tax is fully recoverable through Input Tax Credits (ITCs) for GST and Input Tax Refunds (ITRs) for QST. Yet every year, companies lose thousands simply because they didn’t keep proper documentation, incorrectly coded expenses, or missed eligible claims. Claiming ITCs/ITRs correctly is one of the most profitable administrative tasks your business can perform. This guide explains how to maximize your refunds using the exact system we follow at Mackisen CPA Montreal to ensure clients never leave money on the table.

Why ITCs and ITRs Matter
GST and QST are trust taxes — meant to tax the final consumer, not your business. When your business buys taxable goods or services, you are entitled to recover the GST/QST paid, as long as the expense is for commercial activities and properly documented. This refund can drastically improve cash flow. For startups or businesses with high expenses, ITCs/ITRs often result in large refunds every filing period.

Legal and Regulatory Framework
ITCs are governed by the federal Excise Tax Act and ITRs by Quebec’s Tax Administration Act. These laws require that expenses be reasonable, supported by proper invoices, and used to generate taxable revenue. Hickman Motors (1997, SCC) confirms that the taxpayer must prove entitlement. Canderel Ltd. (1998, SCC) requires filings to reflect commercial reality. Lac d’Amiante (2001, SCC) reinforces that undocumented credits can be denied and reassessed at any time.

What Happens If ITCs/ITRs Are Claimed Incorrectly
Imagine expecting a $12,000 GST/QST refund. You file your return and wait. Instead of the refund, you receive a letter: “Your GST/QST Return Has Been Selected for Review.” CRA or RQ asks for invoices, contracts, bank statements, proof of payment, and reconciliation. The refund is frozen for weeks — sometimes months. If your invoices don’t show the supplier’s GST/QST number or if personal expenses were mixed with business, CRA can deny them entirely. Worse, a denied refund often triggers a multi-year audit. This happens routinely — and almost always to businesses that fail to follow proper ITC/ITR rules from the beginning.

Learning Section: What Counts as an Eligible Expense
An expense is ITC/ITR eligible when it meets all five conditions:
It is for commercial activity
You are registered for GST and QST
You have a valid invoice showing GST/QST separately
You have proof of payment
It is more than 50% business use
Common eligible expenses include: software subscriptions, advertising, equipment, tools, travel, rent, utilities, subcontractors, training, accounting fees, shipping, and marketing.

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Step-by-Step: How to Claim ITCs and ITRs Correctly
Step 1: Gather supplier invoices with GST/QST numbers.
Step 2: Verify that taxes are calculated correctly.
Step 3: Collect proof of payment for each expense.
Step 4: Assign correct tax codes in your accounting system.
Step 5: Reconcile expenses monthly or quarterly.
Step 6: Enter ITCs/ITRs on your GST and QST returns.
Step 7: Keep all documentation for six years in an audit-ready format.

Documentation Section: What You Must Keep
Supplier invoices showing GST/QST
Proof of payment
Contracts and agreements
Mileage logs for vehicle expenses
Credit notes for adjustments
Bank and merchant processor statements
Reconciliation worksheets
Export or exemption documentation for zero-rated items
Without this documentation, CRA or RQ can deny ITCs/ITRs even if the expense is legitimate.

Common Mistakes to Avoid
Claiming personal expenses
Using credit card statements as invoices
Missing supplier GST/QST numbers
Claiming meals at 100% instead of 50%
Not prorating mixed-use expenses
Claiming expenses before the effective registration date
Failing to reconcile merchant deposits
Misclassifying exempt vs zero-rated expenses

Winning With Revenue Québec and Canada
Mackisen ensures complete accuracy by verifying supplier tax numbers, checking business-use ratios, conducting monthly reconciliation, organizing all support documents, and preparing audit-ready ITC/ITR packages. When CRA or RQ reviews your refund, everything is structured, indexed, and defensible.

Mackisen Service Hub
We manage ITC/ITR optimization for businesses of all sizes. Our team handles expense review, tax coding clean-up, documentation collection, credit maximization, and refund submission. We ensure no refund is delayed or denied due to missing paperwork or incorrect claims.

Why Mackisen
With more than 35 years of CPA experience, Mackisen CPA Montreal ensures your GST/QST refunds are maximized, compliant, and protected from audit exposure. We help you recover every dollar you’re entitled to — safely and professionally.