An input tax credit is the GST/HST a registered business pays on its purchases, which it claims back so that it only remits tax on the value it adds.
GST/HST is a value-added tax, so businesses do not bear the tax on their inputs. When you buy supplies, equipment or services for your business, the GST/HST you pay is recoverable as an input tax credit, netted against the tax you collected on sales. You remit only the difference.
To claim ITCs you must be registered, the expense must be for commercial activity, and you must hold proper documentation showing the tax. Common errors include claiming the full ITC on expenses that are only partly commercial, or on the 50% non-deductible portion of meals. Missed ITCs can generally be claimed for up to four years.
You buy a $2,000 laptop plus $260 HST for your business. You claim the $260 as an input tax credit on your HST return, reducing what you owe the CRA dollar for dollar, so the laptop effectively costs you $2,000.
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