Input Tax Credit (ITC)

What it means

An Input Tax Credit lets a GST/HST-registered business recover the GST/HST it paid on purchases used in commercial activity, effectively removing that tax from the business's own cost. For vehicles and other capital property, the ITC available can be limited — for example, capped to the same ceiling used for CCA purposes, rather than the full purchase price.

Why it matters

Without claiming ITCs a business is effectively paying GST/HST twice — once to its supplier and once (implicitly) by not recovering it — so tracking and claiming them properly is part of the real cost comparison between financing and leasing.

Common misunderstandings

• •The ITC on an expensive vehicle isn't unlimited — it's generally restricted to the GST/HST portion of the same capped amount used for depreciation purposes, not the full purchase price.
• •Only registrants using the property in commercial activity can claim ITCs — personal-use purchases don't qualify.

Where you'll see it

On a business's GST/HST return, and in any full cost comparison between buying and leasing business assets.