Yes -- the input tax credit is triggered by tax on your own purchases, not by whether your client has paid your invoice.
Short answer
Yes. Under subsection 169(1) of the Excise Tax Act, an input tax credit is calculated on the tax “that becomes payable by the person during the reporting period or that is paid by the person during the period without having become payable” — it’s about when GST/HST on your own purchases hits, not when your customer settles your invoice. The two are entirely separate clocks.
A contractor buys $50,000 of materials plus $2,500 GST in June, on 30-day supplier terms. Under s.168(1), tax is payable on the earlier of the day consideration is paid and the day it becomes due — so that $2,500 becomes payable in June regardless of when the contractor actually pays the supplier. Meanwhile the contractor’s own client hasn’t paid the June progress draw yet. None of that matters for the ITC: the contractor claims the $2,500 on its June (or quarterly) GST/HST return, full stop.
There is a real, narrower rule that trips people up here: s.168(7)’s construction-holdback carve-out. It says tax on a holdback amount a payer is entitled to retain under a construction contract “is payable on the earlier of the day that part is paid and the day it becomes payable” — meaning the contractor doesn’t have to remit tax on its own withheld invoice amount until the holdback is actually released or otherwise falls due. That’s an output-side timing rule about what the contractor owes the CRA on money owed to it — not an input-side rule about ITCs on what it owes suppliers. Confusing the two is the single most common construction-GST mistake.
“We can’t claim it till we’re paid” and “we don’t have to remit it till we’re paid on the holdback” sound like the same principle applied twice, but they govern opposite sides of the ledger and different provisions entirely. Holding back an ITC claim because a client invoice is still outstanding doesn’t protect anything — it just delays a credit you’re already entitled to, hurting your own cash flow for no compliance benefit. The s.168(7) holdback rule, by contrast, is doing real work: it keeps a contractor from having to remit tax on money it may never actually collect if the holdback is disputed.
Because the ITC formula in s.169(1) also requires the property or service be acquired “for consumption, use or supply in the course of commercial activities,” retain the supplier invoice showing the tax charged and the date it became payable — that’s the record that supports the claim if it’s ever reviewed, independent of your own client’s payment history. This sits alongside how GST applies to a deposit you collect and how a small tool purchase is treated as the three timing questions that come up most in a contractor’s GST filing.
A 30-minute call is enough to check your claim timing against s.169(1).
