Late GST/HST Filing Penalties: How to Avoid or Request Waivers – A Complete Guide by a Montreal CPA Firm Near You

Introduction

Missing a GST/HST filing deadline can trigger costly penalties, interest, and even CRA collections. For small businesses, contractors, e-commerce sellers, and corporations, GST/HST compliance is one of the most common (and most misunderstood) obligations. Because GST/HST is collected in trust from customers, CRA treats late filings and remittances very seriously. The good news: penalties can often be reduced, waived, or avoided entirely with the right strategy. This guide explains how GST/HST penalties work, how CRA calculates them, and how you can request relief if you filed or paid late.

Legal and Regulatory Framework

GST/HST penalties are governed by the Excise Tax Act, which requires registrants to file returns and remit taxes by the due date. Late filing, late payment, missing returns, or incorrect reporting can lead to penalties, interest, and collection actions. CRA may also charge gross negligence penalties for serious non-compliance. Penalties apply to annual, quarterly, and monthly filers. CRA may waive penalties and interest under the Taxpayer Relief Program, but only when justified.

Key Court Decisions

In Precision Gutters v. Canada, ITC claims were denied due to documentation issues, demonstrating CRA’s strict enforcement of GST/HST rules. In Dunmill Health Care Corp. v. Canada, CRA’s late-filing penalties were upheld because remittances were consistently late. In Bozzer v. Canada, the court confirmed that CRA may waive interest only in the most recent 10 years, reinforcing the importance of timely relief applications. These cases show that CRA enforces deadlines strictly but relief is possible when circumstances justify it.

Types of GST/HST Late Filing Penalties

1. Late Filing Penalty

If a GST/HST return is filed late AND you owe a balance, CRA charges:

• 1% of the balance owing, plus

• 0.25% of the balance owing per month, up to 12 months
  This is separate from interest on unpaid balances.

2. Failure to File Penalty

If CRA has to issue a demand to file, additional penalties apply for not responding.

3. Late Payment Interest

Charged daily, compounded, on unpaid balances from the due date until payment is received.

4. Instalment Interest & Penalties

For annual filers required to make quarterly instalments, late instalments result in interest and possible penalties.

5. Gross Negligence Penalties

Applied when CRA believes a registrant intentionally ignored obligations—up to 25% of the tax in serious cases.

Why GST/HST Penalties Happen

Businesses often incur penalties due to: cash-flow shortages, poor bookkeeping, misunderstanding filing frequencies, late receipt of documents, incorrect GST/HST settings on e-commerce platforms (Shopify, Stripe, Amazon), missing ITC documentation, or misclassified taxable vs exempt sales. In Quebec, dual GST/QST filings add complexity.

How to Avoid GST/HST Penalties

File on time—even if you can’t pay.
Use automatic reminders in accounting software.
Make partial payments to reduce interest.
Track ITCs monthly.
Reconcile merchant accounts (PayPal, Stripe, Square) regularly.
Ensure your GST/HST settings in Shopify/Amazon are correct.
Work with a CPA for quarterly reviews.
Avoid mixing business and personal spending.

How to Request Waivers for GST/HST Penalties

GST/HST penalties may be waived under the Taxpayer Relief Program (Section 281.1 of the Excise Tax Act). CRA may reduce or eliminate penalties and interest when:

• Serious illness occurred

• Natural disasters or personal trauma prevented filing

• Records were destroyed

• CRA provided incorrect information

• Financial hardship made compliance impossible

• Circumstances beyond your control caused the delay
  To apply, file Form RC4288, along with supporting evidence.

What You Need for a Strong Penalty Relief Application

Provide: medical records, hospital notes, proof of hardship, business disruption records, fire/flood police reports, emails from CRA showing misinformation, and a detailed narrative explaining why the delay occurred. Relief is rarely granted without strong documentation.

How to Correct Late or Missed Returns

You must file all outstanding GST/HST returns before CRA considers relief. CRA will not negotiate if returns are unfiled. Late-filed returns may still qualify for relief if circumstances justify the delay.

What Happens if You Ignore Late GST/HST Filings

CRA may: freeze bank accounts, garnish receivables, deny ITCs, seize refunds, escalate to collections, or apply gross negligence penalties. GST/HST is viewed as “trust money,” so enforcement is strict and sometimes immediate.

When to Use the Voluntary Disclosures Program (VDP)

If you missed GST/HST filings for multiple years or underreported taxable sales, the VDP may eliminate penalties and reduce interest—but only if CRA has not contacted you yet.

Mackisen Strategy

At Mackisen CPA Montreal, we help businesses reduce or eliminate GST/HST penalties by reconstructing records, filing missing returns, correcting ITC documentation, preparing Taxpayer Relief applications, negotiating with CRA Collections, and analyzing whether VDP is appropriate. We also implement systems to ensure future compliance.

Real Client Experience

A Montreal e-commerce seller reduced $18,000 in GST/HST penalties after we filed a detailed Taxpayer Relief request. A contractor avoided gross negligence penalties after proving illness during the filing period. A restaurant recovered denied ITCs by correcting documentation. A retail business eliminated two years of late filing penalties through VDP.

Common Questions

Can CRA waive GST/HST penalties? Yes—through Taxpayer Relief. Does filing late automatically trigger an audit? Not always, but repeated lateness increases risk. Can GST returns be filed with zero payment? Yes. Does CRA collect GST/HST during disputes? Yes—GST/HST objections do not pause collections.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses avoid or eliminate GST/HST penalties through expert strategy, documentation, and compliance support. We protect your cash flow and ensure peace of mind.