GST bad debt: claim the unpaid share of tax on line 107 within 4 years

Which line and formula does each bad debt situation use?

A written off debt reduces net tax on line 107, and money collected on it later raises net tax on line 104, both in the period the event happens canada.ca. The CRA says not to touch the return where the sale was first reported. The rule itself is ETA 231(1) for the deduction and 231(3) for the recovery laws-lois.justice.gc.ca.

The examples come from the CRA's guide for registrants: a Manitoba sale of $1,120 with $50 GST and $70 PST, $800 paid, $320 written off, then a later $400 payment on a fully written off sale of the same size canada.ca. PST sits inside B and C, so a sale in a PST province always recovers less than the full GST share of what's unpaid. The rest of the return is mapped on the GST/HST return lines page.

What must be true before your client can claim?

ETA 231(1) and (1.1) set five conditions, and all of them have to hold laws-lois.justice.gc.ca:

• The supply was taxable and not zero rated, made for consideration.
• The customer dealt with your client at arm's length.
• It is established that all or part of the consideration and tax has become a bad debt.
• Your client wrote the debt off in its books of account.
• The tax on the sale was included in net tax for the period it became collectible, and the net tax reported for that period was remitted.

Related persons are not considered to deal at arm's length, so a debt owed by a related company or a family member gives no adjustment even when it's plainly uncollectible laws-lois.justice.gc.ca. The deduction belongs to the supplier (the "reporting entity" in 231(5)), not to whoever holds the receivable later laws-lois.justice.gc.ca.

The remitted condition catches more files than you might expect. If the period that reported the sale still has an unpaid balance, the bad debt claim fails until that net tax is paid.

How much HST does an $8,300 Ontario write off recover?

Your client is an Ontario contractor filing quarterly. In September 2025 it bills an arm's length customer $10,000 plus $1,300 HST (13%), $11,300 in total, and reports and pays the $1,300 on its July to September 2025 return. The customer pays $3,000 in November, then stops answering. In February 2026 your client concludes the rest is gone and writes off $8,300.

The January to March 2026 return is due April 30, 2026, one month after the quarter ends canada.ca. That date starts the clock in the next section. The $115.04 goes on the July to September 2027 return, the period the money arrived, and the 2026 return stays as filed canada.ca.

How long does your client have to claim it?

The adjustment has to be claimed in a return filed within four years after the due date of the return for the period in which the debt was written off laws-lois.justice.gc.ca. In the example above, that's any return filed by April 30, 2030. Missing one quarter doesn't lose the claim: it can sit on a later return inside the window. Past it, the tax is gone.

The four years run from the write off, not from the sale. A 2019 invoice written off in 2026 is still in time, provided the 2019 tax was reported and remitted. So the date your client actually records the write off in its books matters, and you want it documented. If an old return itself was wrong, that's a different fix, covered on the amended return page.

Use the tax that applied at the time of the sale, not today's rate canada.ca. Nova Scotia's HST fell from 15% to 14% on April 1, 2025 canada.ca. A Halifax client that billed $2,000 plus $300 HST in January 2025 and writes off the full $2,300 in 2026 claims $300, not $280. The current rates are on the HST rates page.

Which cases block or change the claim?

Quick method filers: there is no bad debt adjustment for supplies included in the quick method calculation, because the remittance rate already priced that tax canada.ca. Only supplies outside it (sales of capital property, for instance) get the line 107 and line 104 treatment. The election and the rates are on the quick method page.

Sold or factored receivables: a buyer of the receivable didn't make the supply, so 231(1) doesn't give it the deduction. If your client takes a receivable back from a financing company under a recourse clause, then writes it off, the CRA's position in policy statement P-029R is that your client can claim under 231(1) in the period of the write off, provided the usual conditions are met canada.ca. P-029R dates from 1999 and the CRA warns it may not reflect later amendments.

The income tax side: ITA 20(1)(p) deducts debts established to have become bad in the year, but only debts that were included in income laws-lois.justice.gc.ca. The CRA's business expense guidance says the same: the receivable must already have been included in income canada.ca. The GST/HST part of an invoice never went into a registrant's income, so the 20(1)(p) deduction is the before tax part ($7,345.13 above) and the tax part comes back through 231. Booking the full $8,300 as bad debt expense and also claiming line 107 counts the $954.87 twice.

Quebec: Revenu Québec administers both the GST and the QST there, on one combined return revenuquebec.ca, and the QST follows its own Quebec rules, so this page covers only the GST side of a Quebec invoice. The QST return is covered on the QST return page.