Sooner or later, most unregistered businesses that should have been collecting GST ask the same question: what actually happens if I never charged it? The honest answer is that the obligation doesn't just go away because you didn't know about it. The CRA can figure out what you should have collected, bill you for it directly, and add interest and penalties on top. Here's exactly how that plays out.
You Owed the GST Whether You Were Registered or Not
A lot of people assume GST obligations only start once you're registered. That's not true. Under ETA s. 221(1), once you make a sale that GST applies to, you're on the hook to collect GST on it — whether you've registered or not. If your sales crossed the threshold and you kept invoicing without adding GST, you were still supposed to be collecting it the whole time.
The CRA Doesn't Need a Return From You to Bill You
Because you owed the GST regardless of registration, the CRA doesn't need you to have filed anything to come after it. ETA s. 296(1) lets the CRA calculate what you owe and bill you for it even if you were never registered, and ETA s. 299(1) confirms that never having filed a return doesn't stop them. In practice, this means the CRA can look at your bank deposits, invoices, and contracts, work out what your sales likely were, and send you a bill based on that — with or without your input.
Will They Add GST On Top of Your Sales, or Pull It Out of Them?
This is the part that catches most people off guard. When the CRA bills you for GST you didn't collect, there's a key question: do they add it on top of what you charged, or treat GST as already included in your prices?
The default is that they add it on top. The CRA generally treats the price you actually charged as your revenue, full stop, and calculates the GST separately on top of it (ETA ss. 165, 221, 223; CRA Policy Statement P-118R). They don't assume GST was already sitting inside your sales numbers. Which way it goes comes down to the facts — mainly, how you were actually pricing and invoicing:
- Added on top (the usual outcome) — this is what happens if your invoices or pricing never mentioned tax, or if you genuinely thought the work was tax-exempt. The GST becomes an extra amount owing, on top of the sales you already reported.
- Pulled out of your existing price (the exception) — this only happens if there's real proof your price already included tax, like a sign that said "all taxes included," or a consistent pricing pattern that your profit margin could actually support. The CRA will check whether your numbers still leave you a normal profit before accepting this.
In practice, most small businesses that simply didn't realize they'd crossed the threshold end up with GST added on top of what they already reported — not pulled out of it. So if you invoiced $80,000 with no GST charged, you're not looking at a small slice of that $80,000. You're looking at an extra 5% added on top of it, out of pocket.
Going Back to Old Customers Rarely Works
Since the GST usually gets added on top rather than pulled from what you already charged, it typically comes out of your own pocket. Going back to a customer years later and asking them to pay GST on a job you already finished and invoiced almost never works in practice — the job's done, the invoice is paid, and there's no easy way to reopen it.
The law does technically allow this: a business billed this way can try to invoice the customer after the fact and chase payment under ETA s. 224, and a court upheld this approach in National Money Mart Co. v. 24 Gold Group Ltd., 2017 ONSC 6373. But for most small businesses, this is more of a legal technicality than something you'd actually do — the hassle of collecting from a former customer usually isn't worth it.
You Don't Get Credit for the GST You Paid, Either
Here's the part that makes it worse: while you're being billed for GST you didn't collect, you generally can't offset that with the GST you already paid on your own business expenses during that same stretch. Getting that money back is something only registered businesses can do, under ETA s. 169(1) — and if you weren't registered, you didn't qualify. Fuel, materials, subcontractor costs — any GST you paid on those during the time you weren't registered is just gone. No way to get it back. It becomes part of what the job cost you.
Interest and Penalties Stack On Top
The bill isn't just the GST itself:
- Interest builds up daily on the amount you owe, starting from when you should have paid it (ETA s. 280).
- A late-filing penalty also kicks in once a return should have been filed — 1% of what you owe, plus another 0.25% for every full month it's late, up to a max of 12 months (ETA s. 280.1).
Since these add up over time, a bill that sits unresolved for a few years can end up a lot bigger than the original GST amount.
The Clock Might Not Even Be Ticking
Normally, the CRA only has four years to go back and reassess you (ETA s. 298(1)). But that four-year clock only starts once a return has actually been filed. If you never filed one — which is exactly what we're talking about here — there's a real argument that the clock never started, meaning the CRA could still come after you no matter how many years have passed. Waiting it out isn't a safe bet.
Quick Reference: Consequences of Never Charging GST
| Issue | Legislative Basis | What It Means for You |
|---|---|---|
| You owed GST whether registered or not | ETA s. 221(1) | The obligation started the moment you made a taxable sale |
| CRA can bill you without a return on file | ETA ss. 296(1), 299(1) | They can estimate your sales and bill you based on that |
| How they calculate what you owe | ETA ss. 165, 221, 223; CRA P-118R | Usually added on top of your sales, not pulled out of them |
| Getting GST back from old customers | ETA s. 224 | Technically allowed, rarely practical after the fact |
| Credit for GST you already paid | ETA s. 169(1) | Generally lost for the entire unregistered period |
| Interest | ETA s. 280 | Builds up daily on what you owe |
| Late-filing penalty | ETA s. 280.1 | 1% + 0.25% per month late, capped at 12 months |
| How far back they can go | ETA s. 298(1) | May be unlimited if no return was ever filed |
The Bottom Line
Not charging GST doesn't mean you didn't owe it — it means the amount has been quietly growing, with interest, and without the tax credits that would normally help offset it. Since the CRA's four-year time limit may not even be running yet, this isn't something that just goes away if you wait long enough. If you're not sure whether you crossed the threshold, or you know you did and haven't dealt with it, the sooner you sort it out, the more options you'll have.
Not sure if your sales crossed the $30,000 small-supplier threshold in the first place? See When Do You Have to Register for GST. And for more on how registration connects to recovering GST on your expenses, see What Is an Input Tax Credit.
This article is for general informational purposes only and does not constitute legal or tax advice. For guidance specific to your situation, consult a CPA or Canadian tax professional.