When Does GST/HST Become Payable? Invoice Dates, Deposits and Holdbacks

Tax is payable on the earlier of payment and the day consideration becomes due - which for most businesses means the invoice date, months before the money arrives. Here is what the Excise Tax Act actually says about invoice dates, undue delay, deposits, progress billing, construction holdbacks and credit notes.

The 60-second version

• Tax becomes payable on the earlier of the day consideration is paid and the day it becomes due - section 168(1) of the Excise Tax Act [1]. For almost every business that invoices before it gets paid, that means the invoice date, not the payment date.
• "Becomes due" is a defined term, and it has a trapdoor in it. Section 152(1) takes the earliest of the invoice issue date, the invoice date, the day you would have invoiced but for an undue delay, and the day the customer must pay under a written agreement [2]. Sitting on an invoice does not defer the tax.
• You remit on what became collectible, not on what you collected. Section 225(1) builds net tax from amounts that became collectible in the period [3]. Invoice in March, get paid in August, and you have remitted the GST five months before the cash arrived.
• A deposit is not consideration until you apply it. Section 168(9) says so explicitly, refundable or not [1]. A progress payment is the opposite - it is consideration, and tax is payable on it.
• Construction over three months has a hard backstop. Under section 168(3)(c), tax on any unpaid, not-yet-due consideration falls due on the last day of the month following the month of substantial completion [1] - regardless of your billing schedule.
• Statutory and contractual holdbacks are the one real deferral. Section 168(7) pushes tax on the held-back portion out to the earlier of the day it is paid and the day it becomes payable [1].

The general rule: earlier of paid and due

Section 165 imposes GST/HST on the recipient of a taxable supply [4]. Section 168 decides when:

Tax under this Division in respect of a taxable supply is payable by the recipient on the earlier of the day the consideration for the supply is paid and the day the consideration for the supply becomes due [1].

Note what is absent from that sentence. There is no reference to when the work was done, when the goods shipped, when you were paid, or when your reporting period ends. Two events only: payment, and consideration becoming due. Whichever comes first.

Where consideration is paid or becomes due in instalments, subsection 168(2) applies the same test to each instalment separately, and the tax on each day is calculated on that part [1]. So a milestone-billed project generates a separate tax point per milestone, not one at the end.

"Becomes due" is defined, and the definition bites

This is where the real content is, and it is one subsection long:

the consideration, or a part thereof, for a taxable supply shall be deemed to become due on the earliest of (a) the earlier of the day the supplier first issues an invoice in respect of the supply for that consideration or part and the date of that invoice, (b) the day the supplier would have, but for an undue delay, issued an invoice in respect of the supply for that consideration or part, and (c) the day the recipient is required to pay that consideration or part to the supplier pursuant to an agreement in writing [2].

Four dates, earliest wins. Each one catches a different bad habit:

• The earlier of issue date and invoice date. Back-dating an invoice does not move the tax later; it moves it earlier. If you date an invoice 28 March and email it 4 April, the tax point is 28 March.
• The undue-delay rule in paragraph (b). If you finish a job in May and do not invoice until October, the CRA does not have to accept October. The tax point is the day you would have invoiced absent the delay. There is no bright-line test for "undue", which is precisely why leaving billing to drift is a bad idea.
• The contractual due date in paragraph (c). If a written agreement says the customer must pay on the first of the month, that date is a tax point whether or not you have issued anything. Retainer agreements and service contracts with fixed payment schedules routinely create tax points ahead of any invoice.

Leases are carved out. Subsection 152(2) says that for property supplied by way of lease, licence or similar arrangement under a written agreement, consideration is deemed to become due on the day the recipient is required to pay under the agreement [2] - full stop, with no invoice-date test.

You remit on what became collectible, not on what you collected

This is the consequence people feel, and it follows from section 225 rather than section 168.

Net tax for a reporting period is A minus B, where A includes "all amounts that became collectible and all other amounts collected by the person in the particular reporting period as or on account of tax" [3].

Became collectible. Not "collected". Under section 228 you then remit that net tax for the period [5].

So the sequence for an ordinary net-30 invoice that gets paid at day 75 is:

1. You invoice on 10 March. Tax becomes payable that day under sections 168(1) and 152(1) [1][2].
2. The tax is collectible in your March reporting period, so it enters net tax for that period [3].
3. You remit it with that return [5].
4. The customer pays in late May.

You financed the government's tax for two months out of working capital. This is the structural reason slow payers hurt more than the interest arithmetic suggests, and it is a large part of why chasing invoices matters - see charging interest on overdue invoices in Canada.

There is relief, but only at the far end. Section 231(1) lets a supplier deduct the tax portion of a written-off bad debt from net tax, using the formula A times B over C, where the debt arose on an arm's length taxable supply [6]. Subsection 231(1.1) conditions that on having reported the tax as collectible in the right period and having remitted the net tax reported [6]. In other words, the relief is only available to businesses that did the timing correctly in the first place. And if the customer later pays, subsection 231(3) claws it back [6].

Deposits versus progress payments

These get treated as interchangeable in ordinary speech and they are not remotely the same thing for GST/HST.

For the purposes of this section, a deposit ..., whether refundable or not, given in respect of a supply shall not be considered as consideration paid for the supply unless and until the supplier applies the deposit as consideration for the supply [1].

Two things follow. First, taking a genuine deposit does not create a tax point. Second, applying it does - and the day you apply it is the day tax becomes payable on that amount.

The distinction is substance, not labelling. A payment described as a "deposit" that is immediately treated as part payment of the price, and is never at risk of being returned as a deposit, is a progress payment, and tax is payable on it under subsections 168(1) and (2) [1]. Calling it a deposit on the invoice does not change that.

Practically, if you take deposits:

• Do not show tax on the deposit receipt. Nothing is payable yet.
• Show the tax on the invoice where the deposit is applied, calculated on the full consideration, then show the deposit as a payment against the total.
• If a non-refundable deposit is forfeited rather than applied, it was never consideration for the supply under subsection 168(9), which is a different analysis again.

Progress billing and the substantial-completion backstop

Subsection 168(3) is an override that stops long projects from deferring tax indefinitely. Where consideration has not been paid or become due by the last day of the calendar month immediately following the first calendar month in which the triggering event happens, tax on that consideration becomes payable on that day [1].

The triggering events are:

• Tangible personal property sold - ownership or possession transferred to the recipient [1].
• Approval, consignment or sale-or-return - the recipient acquires ownership or on-supplies it [1].
• Written agreements for construction, renovation, alteration or repair of real property or a marine vessel, where the work may reasonably be expected to take more than three months - substantial completion [1].

So on a nine-month renovation substantially completed on 12 September, any consideration not yet paid or due becomes taxable on 31 October, whether or not you have issued the final invoice. Your billing schedule does not override the statute.

Subsection 168(4) takes continuous supplies out of this rule - water, electricity, natural gas, steam and similar property delivered by wire, pipeline or conduit and invoiced on a regular or periodic basis [1].

Holdbacks: the one genuine deferral

Construction holdbacks are the exception that actually helps cash flow. Subsection 168(7) provides that where the recipient retains part of the consideration pending full and satisfactory performance, either under an Act of Parliament or a provincial legislature, or under a written agreement for construction, renovation, alteration or repair of real property or a marine vessel, tax on that part is payable on the earlier of the day it is paid and the day it becomes payable [1].

Note the conditions. The holdback must be statutory - a provincial construction or builders' lien act - or written into the contract, and it must relate to real property or a marine vessel work. A general "we will pay 90% now and the rest when we are happy" arrangement outside those categories does not qualify, and the ordinary section 168 rules apply to the full amount.

Where it does qualify, the mechanics are worth getting right on the invoice: bill the full contract value with tax, show the lien holdback as a retained amount, and track the holdback tax separately so it lands in the reporting period when the holdback is released rather than the period when the work was billed.

Fixing it afterwards: credit and debit notes

Two different sections cover two different errors, with two different time limits.

You charged too much tax. Subsection 232(1) lets you adjust, refund or credit the excess within two years after the day the amount was charged or collected [7].

The consideration was later reduced. A discount, a partial credit, a renegotiated price. Subsection 232(2) gives you until four years after the end of the reporting period in which the consideration was reduced [7].

Either way, subsection 232(3)(a) requires you to issue a credit note containing prescribed information within a reasonable time, unless the other party issues a debit note [7]. What counts as prescribed information is set by the Credit Note and Debit Note Information (GST/HST) Regulations [8] - a credit note that is just a negative line item with no statement that it includes GST/HST is not compliant, and the CRA's administrative policy on adjusting returns is P-149 [11].

Then the net tax moves on both sides: the supplier deducts the amount in the period the credit note is issued or the debit note received, and the recipient adds it in the period the debit note is issued or the credit note received [7]. It is symmetric by design, which is why an informal "just knock it off the next invoice" leaves both parties' returns wrong.

What this means for how you set up invoicing

1. Your tax point is your invoice date. Not your payment date. If your system reports GST on a cash basis without you having elected an approved accounting method, it is reporting the wrong number.
2. Do not date invoices earlier than you issue them. Section 152(1)(a) takes the earlier of the two [2], so a back-dated invoice pulls the tax into an earlier period.
3. Invoice promptly. Paragraph 152(1)(b) means delay does not buy you time, it just makes the tax point arguable [2].
4. Read your own contracts. A written payment schedule creates tax points under paragraph 152(1)(c) with no invoice involved [2].
5. Separate deposits from progress payments in the system, and only put tax on the latter [1].
6. Flag long construction contracts for the substantial-completion date, because that date generates a tax liability on its own [1].
7. Disclose the tax properly. Section 223 governs what has to appear on the invoice [9], and the input tax credit regulations govern what the buyer needs from you [10]. We covered both in what a compliant GST/HST invoice must show.
8. Keep the documents. Credit notes, holdback releases and deposit applications are all part of the audit trail - see how long to keep invoices in Canada.

The rate you charge is a separate question, driven by the place of supply rules rather than by timing - that analysis is in the GST/HST place of supply rules, and Quebec adds a parallel regime covered in Quebec QST invoice requirements.

Frequently asked questions

When does GST/HST become payable - on the invoice date or when I get paid?

On the earlier of the two. Subsection 168(1) of the Excise Tax Act makes tax payable on the earlier of the day the consideration is paid and the day it becomes due. Because section 152(1) deems consideration to become due on the invoice date (or the issue date, if earlier), a business that invoices before it collects has a tax point at the invoice, not at the payment. That is also why section 225(1) computes net tax from amounts that became collectible rather than amounts actually collected.

Can I delay issuing an invoice to push the GST into a later period?

No. Paragraph 152(1)(b) deems consideration to become due on the day the supplier would have issued an invoice but for an undue delay. There is no bright-line definition of undue delay, so the practical effect is that late invoicing does not defer the tax, it just makes your tax point a matter of argument on audit. Paragraph 152(1)(c) adds a further trap: if a written agreement requires the customer to pay on a given day, that day is a tax point whether or not you have invoiced.

Do I charge GST/HST on a deposit?

Not when you take it. Subsection 168(9) says a deposit, whether refundable or not, is not consideration for the supply unless and until the supplier applies it as consideration. Tax becomes payable on the day you apply the deposit against the price. The test is substance, not the word on the receipt - an amount immediately treated as part payment is a progress payment, and tax is payable on it under subsections 168(1) and (2) even if the paperwork calls it a deposit.

How does GST/HST work on a long construction contract?

Each progress payment is its own tax point under subsection 168(2), payable on the earlier of when that part is paid and when it becomes due. On top of that, paragraph 168(3)(c) imposes a backstop for written agreements to construct, renovate, alter or repair real property or a marine vessel where the work may reasonably be expected to take more than three months: any consideration still unpaid and not yet due becomes taxable on the last day of the month following the month of substantial completion, regardless of the billing schedule.

Do I have to remit GST/HST on a holdback before it is released?

No, provided the holdback qualifies. Subsection 168(7) defers tax on a retained portion of the consideration to the earlier of the day it is paid and the day it becomes payable, where the amount is retained pending full and satisfactory performance under a federal or provincial statute or under a written agreement for construction, renovation, alteration or repair of real property or a ship or other marine vessel. An informal retention outside those categories does not qualify and the ordinary timing rules apply to the full amount.

What if I charged the wrong amount of GST/HST?

Subsection 232(1) allows you to adjust, refund or credit tax charged in excess of what was collectible, within two years of charging or collecting it. If instead the consideration itself was later reduced, subsection 232(2) gives you four years after the end of the reporting period in which the reduction occurred. In both cases subsection 232(3) requires a credit note containing the information prescribed by the Credit Note and Debit Note Information (GST/HST) Regulations, within a reasonable time, unless the other party issues a debit note. The adjustment then flows through both parties' net tax.

Can I get back GST/HST I remitted on an invoice the customer never paid?

Yes, through section 231. Where an arm's length taxable supply produces a bad debt that you write off in your books, subsection 231(1) lets you deduct the tax portion from net tax using the formula A times B over C. Subsection 231(1.1) conditions this on having included the tax in the net tax reported for the period in which it became collectible and having remitted the net tax reported in that return. If the customer later pays, subsection 231(3) requires you to add the recovered portion back.

Sources cited in this article

1. Excise Tax Act, s. 168 - When tax payable (Justice Laws)
   https://laws-lois.justice.gc.ca/eng/acts/E-15/section-168.html
2. Excise Tax Act, s. 152 - When consideration due (Justice Laws)
   https://laws-lois.justice.gc.ca/eng/acts/E-15/section-152.html
3. Excise Tax Act, s. 225 - Net tax (Justice Laws)
   https://laws-lois.justice.gc.ca/eng/acts/E-15/section-225.html
4. Excise Tax Act, s. 165 - Imposition of goods and services tax (Justice Laws)
   https://laws-lois.justice.gc.ca/eng/acts/E-15/section-165.html
5. Excise Tax Act, s. 228 - Calculation and remittance of net tax (Justice Laws)
   https://laws-lois.justice.gc.ca/eng/acts/E-15/section-228.html
6. Excise Tax Act, s. 231 - Bad debt deduction from net tax (Justice Laws)
   https://laws-lois.justice.gc.ca/eng/acts/E-15/section-231.html
7. Excise Tax Act, s. 232 - Refund or adjustment of tax, credit and debit notes (Justice Laws)
   https://laws-lois.justice.gc.ca/eng/acts/E-15/section-232.html
8. Credit Note and Debit Note Information (GST/HST) Regulations, SOR/91-44 (Justice Laws)
   https://laws-lois.justice.gc.ca/eng/regulations/SOR-91-44/page-1.html
9. Excise Tax Act, s. 223 - Disclosure of tax on the invoice (Justice Laws)
   https://laws-lois.justice.gc.ca/eng/acts/E-15/section-223.html
10. Input Tax Credit Information (GST/HST) Regulations, SOR/91-45 (Justice Laws)
    https://laws-lois.justice.gc.ca/eng/regulations/SOR-91-45/page-1.html
11. CRA - P-149 Administrative Policy Regarding Adjustment to the GST/HST Return
    https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p-149r.html
12. CRA - RC4022 General Information for GST/HST Registrants
    https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4022.html
13. CRA - Charge and collect the GST/HST: Which rate to charge
    https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/charge-collect-which-rate.html

All sources verified August 26, 2026. Spotted a link that has moved? Email [email protected] and we will correct it.