When HST becomes payable on a construction contract

HST on a construction contract becomes payable on the earlier of the day the money is paid to you and the day it becomes due. Under a written contract for work on real property there is a second trigger sitting behind that one. Once the job is substantially complete, the HST on anything you have not yet billed becomes payable at the end of the following month, whether an invoice exists or not.

That second rule is the one that costs money. A contractor who finishes a job in August, holds the final billing until the customer signs off on deficiencies in November, and files a quarterly return on October 31 has already missed HST that became payable on September 30. It is among the most common corrections we make in accounting work for contractors. Below is how the timing actually works, in the order the rules apply.

The general rule, and what "becomes due" means

Subsection 168(1) of the Excise Tax Act says tax "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." Paid is obvious. Due is where the arguments happen.

Section 152 sets the date consideration becomes due as the earliest of:

• the earlier of the day the supplier first issues an invoice and the date of that invoice
• the day the supplier would have issued an invoice but for an undue delay
• the day the recipient is required to pay under an agreement in writing

CRA sets these out in its time of liability memorandum and in the companion memorandum on agreements in writing. That list catches contractors in different ways.

Dating an invoice earlier than you send it does not help you. The test takes the earlier of issuance and the invoice date, so an invoice dated August 20 and emailed on September 3 fixes the HST at August 20. Backdating moves the tax into an earlier period, it does not move it later.

A payment date written into the contract can beat the invoice entirely. If the contract says the customer pays within 30 days of each month end and you never send anything for September, the consideration still became due under paragraph (c). Where an invoice is issued before the date payment is required under the agreement, the earlier invoice date governs instead.

The undue delay paragraph exists to stop the "I just will not invoice" strategy. Once the work is done and an invoice would ordinarily have gone out, the clock is running.

Progress payments are taxed one at a time

Subsection 168(2) deals with consideration that is paid or becomes due on more than one day. Tax is payable on each part on the earlier of the day that part is paid and the day it becomes due, and it is calculated on that part alone.

A construction contract is therefore not one HST event at the end of the job. Each progress billing is its own timing event. A $180,000 contract billed in six monthly draws of $30,000 produces six separate liabilities of $3,900, landing in whichever reporting periods the draw dates fall into. That works in your favour, because you remit against the same money you are collecting rather than facing $23,400 in one quarter. It also means the HST return has to be built from the billing schedule for each job rather than from a bank feed, which is why we push contractors toward job-level record keeping early.

Substantial completion: the trigger that does not need an invoice

Now the rule that gives the post its name. Paragraph 168(3)(c) applies where the supply is under an agreement in writing for the construction, renovation or alteration of, or repair to, real property. If all or part of the consideration has neither been paid nor become due by the end of the calendar month following the month in which the work was substantially completed, the tax on that unpaid, unbilled portion becomes payable on that day.

CRA's override rule memorandum puts substantially completed at 90 per cent or more. Read the mechanism carefully:

• it applies to the amount that has not been paid and has not become due
• the trigger date is the last day of the month after the month of substantial completion
• no invoice is required for the tax to become payable
• the contract has to be in writing, so a handshake job stays on the general rule

So a job that hits 90% on August 12 or August 28 produces the same trigger date, September 30. There is no invoice in the story anywhere and the customer has not been asked for the money. The HST is payable regardless, and if the return for that period is already filed, you are amending it.

One carve-out matters here. Subsection 168(7) applies notwithstanding subsection (3), so the statutory holdback your customer is retaining pending full and satisfactory performance is not swept up by the substantial completion trigger. HST on the holdback follows its own timing, which we cover in construction holdbacks, HST timing and WIP. Everything else that is unbilled at substantial completion is caught.

What this does to a quarterly filer's cash

Take a $180,000 contract plus HST with a 10% holdback, a contractor who files quarterly with periods ending March 31, June 30, September 30 and December 31, and substantial completion reached in the last week of August. $126,000 has been progress billed and is due. The change orders and the final draw have not been billed yet because the site meeting is set for October.

Now the calendar. Quarterly and monthly filers file and pay one month after the end of the reporting period, which you can confirm for your own year end with our deadline checker.

$4,680 leaves the bank on October 31 on a $36,000 balance that has not been invoiced and may not be collected until December. Input tax credits on your own supplier invoices reduce the net figure, so the cash hit depends on what you bought in the same quarter, but the HST on that $36,000 is in the return either way.

Then move substantial completion four days later, to September 2. The trigger becomes October 31, which falls in the October to December quarter, and the return is due January 31. Same job, same money, three extra months of float, decided by which side of a month end the ninetieth percent landed.

Quarterly is CRA's assigned reporting period for annual taxable supplies above $1,500,000 and up to $6,000,000, with monthly assigned above that. A contractor whose revenue has grown into monthly filing meets this rule four times as often. Getting the billing schedule and the HST return onto the same system is part of our bookkeeping and HST work.

Deposits are outside the net until you apply them

Subsection 168(9) says a deposit, refundable or not, "shall not be considered as consideration paid for the supply unless and until the supplier applies the deposit as consideration for the supply." CRA's deposits memorandum defines a deposit as "an amount given by a recipient as security for the performance of an obligation by the recipient."

Read that definition against how deposits are actually taken in the trades. Security for the customer's performance is a genuine deposit. Money the customer hands over so you can order the cabinets is a payment on account of the contract, and calling it a deposit on the paperwork does not change what it is. A 30% payment at signing that is spent on materials and credited against draw one has the character of a progress payment, and the HST on it follows the ordinary timing rules.

The practical question is whether the amount is being held as security or has been applied to the contract. If you take real deposits, hold them in a way you can point to and record the date each one is applied, because that date is the tax point.

New residential construction is a different regime

Everything above concerns construction services supplied to someone else, the ordinary case where a contractor works on land the customer owns. Building new or substantially renovated housing for sale puts you in a separate part of the Act as a builder, with self-supply rules that deem a sale and repurchase in certain situations, and with the GST/HST new housing rebate and the Ontario new housing rebate attached. CRA's guidance on GST/HST and home construction sets out who counts as a builder. The timing differs too, because tax on a taxable sale of real property becomes payable on the earlier of the day ownership transfers and the day possession transfers. If that is your business, the progress billing analysis above is not your starting point.

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General information only, current at August 2026. Tax rules change and GST/HST status is fact-specific. Confirm your own position before relying on anything here.