This is a meaningfully worse position to be in than never charging GST in the first place. When you never charged GST, you owed money you never collected. When you charge GST and don't remit it, the money actually landed in your bank account — and legally, it was never really yours to keep. Under ETA s. 222, any GST/HST you collect is automatically held in trust for the government the moment you collect it. You're just holding it on the CRA's behalf until you send it in.
There's No Debate Over the Amount — You Already Know What You Collected
In Part 1, a lot of the complexity came from figuring out whether GST should be added on top of your sales or pulled out of them, since nothing was ever actually charged. That question doesn't come up here. You charged GST at whatever rate applied and your customers paid it — so the amount owing is simply what you collected and didn't send in. There's no estimating or reconstructing involved.
The CRA Can Still Bill You — and You Still Had to File
Just like in the never-charged scenario, the CRA doesn't need your cooperation to assess what you owe. ETA s. 296 lets them assess the unremitted amount directly. And separately, ETA s. 238(2) confirms you were required to file a return even if you were never registered — not filing doesn't mean the obligation wasn't there.
The Same Interest and Penalties Apply
Just as with the never-charged scenario:
- Interest builds up daily on the unremitted amount, at the CRA's prescribed rate, from when it should have been paid (ETA s. 280).
- A late-filing penalty applies once a return should have been filed — 1% of what's owing, plus 0.25% for every full month it's late, up to 12 months (ETA s. 280.1).
If You're Incorporated, This Can Become Personal
Here's where this scenario diverges sharply from Part 1. If your business is incorporated and it collected GST but didn't remit it, the directors of the corporation can be held personally liable for that unremitted amount — on top of whatever the corporation itself owes. This is under ETA s. 323, and it exists specifically because the money is trust money, not just a corporate debt. This kind of personal exposure doesn't come up in the never-charged scenario, because there was never any trust money to begin with — just an amount that was owed and never collected.
The CRA Can Go Back Further Than 4 Years
Normally, the CRA's window to reassess you is four years. But ETA s. 298(4) removes that time limit where there's fraud, or a misrepresentation caused by neglect, carelessness, or deliberate default. Collecting GST from customers and not sending it in, year after year, is exactly the kind of pattern this exception was built for. In practice, that means the usual four-year clock may not protect you here at all — the CRA can go back as far as it needs to.
The CRA Takes This More Seriously
Put simply: this isn't treated the same as an honest mistake about registration. Because the money was actually collected at some point and then didn't make it to the CRA, it can look less like a business that missed a registration deadline and more like a business that used government money to fund its own operations. That's a materially different — and more serious — position to be in.
Quick Reference: Consequences of Collecting GST and Not Remitting It
| Issue | Legislative Basis | What It Means for You |
|---|---|---|
| Collected GST is held in trust, not just owed | ETA s. 222 | The money was never fully yours to begin with |
| No dispute over the amount owing | — | You know exactly what you collected and didn't remit |
| CRA can bill you directly | ETA s. 296 | Assessment based on the actual amount collected |
| Filing obligation exists even without registration | ETA s. 238(2) | Not filing doesn't erase the requirement |
| Interest | ETA s. 280 | Builds up daily on the unremitted amount |
| Late-filing penalty | ETA s. 280.1 | 1% + 0.25% per month late, capped at 12 months |
| Director personal liability | ETA s. 323 | Directors can be on the hook personally, on top of the corporation |
| How far back CRA can go | ETA s. 298(4) | No time limit where there's fraud, neglect, or carelessness |
The Bottom Line
Charging GST and not remitting it is a different category of problem than never charging it at all. The money was collected, it was legally never yours, and the consequences reflect that — personal liability for directors, no shelter from the usual four-year limit, and a CRA posture that treats this as more than an oversight. If this describes your situation, the sooner you deal with it directly, the better your options.
If you're not sure which situation applies to you, start with Part 1: If You Never Charged GST/HST to Customers.
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.