CSBFP and HST/GST: are taxes included in the eligible loan amount?

title: "CSBFP and HST/GST: are taxes included in the eligible loan amount?" description: "HST and GST on eligible equipment and leasehold improvements can be included in a CSBFP loan — this is one of the program's most practically useful features and is often overlooked in project budgeting. How taxes are included, how input tax credits interact with the CSBFP registered amount, and what this means for your project budget and equity injection." date: "2026-05-26" author: "Capital Toolkit" tags: ["csbfp", "HST", "GST", "taxes", "project budget", "eligible costs", "canadian financing", "small business"] videos:

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When building a CSBFP project budget, a common oversight is treating the tax on eligible purchases as a separate line item outside the loan — when in fact, the taxes paid on eligible CSBFP costs can be included in the registered loan amount. For a $400,000 equipment and leasehold project, the HST on that work is $52,000 in Ontario — a significant amount that doesn't need to come out of the equity injection.

HST and GST are eligible costs under CSBFP

The CSBFP program allows the loan to be registered on the full cost of eligible assets, including applicable sales taxes (HST, GST, and provincial sales taxes where applicable). This means:

A piece of equipment purchased for $80,000 + $10,400 HST = $90,400 total cost eligible for CSBFP
Leasehold improvements invoiced at $150,000 + $19,500 HST = $169,500 eligible for CSBFP
The registered loan amount can include the tax component

This is not a special provision or exception — taxes on eligible assets are simply part of the "cost" that CSBFP finances. Many borrowers and their advisors assume they need to fund the tax portion from equity; they don't.

How this affects your project budget

In planning a CSBFP project, the correct way to budget is to start with the total invoice cost including taxes, not the pre-tax cost. The sub-limits apply to the total:

Non-RP (equipment + leaseholds + intangibles) sub-limit: $500,000 — including taxes on those assets
Real property sub-limit: $1,000,000 — including taxes on that acquisition

Example: manufacturing equipment purchase in Ontario

Item	Pre-tax cost	HST (13%)	Total eligible
CNC machining centre	$220,000	$28,600	$248,600
Robotic welding cell	$85,000	$11,050	$96,050
Electrical installation	$45,000	$5,850	$50,850
Total	$350,000	$45,500	$395,500

The borrower can register a CSBFP loan for up to $395,500 (less equity injection) — not $350,000. Including taxes in the registered loan increases the loan amount by $45,500 in this example.

Input tax credits: the key interaction

Most GST/HST-registered businesses are entitled to claim input tax credits (ITCs) on the HST paid on business purchases. For eligible equipment and leasehold improvements, the ITC on the HST paid is typically claimable on the next GST/HST return.

This creates a specific interaction with the CSBFP structure:

The CSBFP loan is registered on the full cost including HST — the loan amount is based on invoices including tax.
The borrower claims the ITC on their HST return — the full HST paid on eligible purchases is recovered from CRA, typically within 30–60 days after the return is filed.
The ITC recovery reduces the effective cost of the project — the HST component, though financed initially, is returned as an ITC refund.
The ITC proceeds belong to the borrower, not the lender — the lender has no claim on the ITC refund. The borrower can use the ITC recovery to build working capital, pay down other debt, or pre-pay the CSBFP loan (CSBFP permits prepayment without penalty).

Net effect: Including HST in the CSBFP loan means the borrower uses the loan to finance the tax temporarily — and then recovers most or all of that tax back from CRA. The effective cost of including HST in the loan is the interest on the tax amount for the period between disbursement and ITC recovery.

For a $45,500 tax amount at 7.95% annual interest rate with a 60-day recovery period: approximately $600 in interest — a minor cost for a significant budget planning benefit.

When ITCs are not fully claimable

Some businesses are partially or wholly exempt from ITC claims:

Exempt or partial ITC situations:

Medical, dental, and health care providers (supplies used in exempt healthcare services)
Financial services businesses
Residential landlords (rental housing is exempt from GST/HST)
Charities and non-profits with restricted ITC entitlements
Businesses below the voluntary registration threshold (under $30,000 annual revenue — these businesses are not GST/HST registrants)
Businesses with a mix of taxable and exempt supplies (partial ITC based on the taxable/exempt ratio)

For businesses in these categories, the HST on eligible CSBFP costs may be partially or wholly non-recoverable — which means the tax cost is a permanent additional expense, not a temporary financing item.

For non-registrants: If the business is not GST/HST registered (new business under $30,000 revenue, or a qualifying small supplier), the HST paid is a real cost that is not recovered. Including it in the CSBFP loan is still valid — the loan covers the total invoice cost — but there is no ITC recovery to offset the tax.

Provincial sales taxes (PST/QST)

British Columbia, Saskatchewan, and Manitoba have separate provincial sales taxes (PST) that apply to goods (including equipment) but not services. The PST on equipment purchases in these provinces is not recoverable via ITC (PST is not an input tax credit system like GST/HST). The PST portion is a real, permanent cost included in the total eligible cost.

Québec has its own QST (Québec Sales Tax) system, which operates similarly to GST/HST with recoverable ITCs for QST-registered businesses.

Ontario and most other provinces: have HST (harmonized sales tax) — a single tax that is fully recoverable via ITC for registered businesses.

For a BC business buying $300,000 in equipment, the 7% PST ($21,000) is a non-recoverable cost that is included in the CSBFP eligible amount. Unlike the recoverable HST component, this PST is permanently part of the project cost.

Practical application: building your CSBFP budget

When preparing the CSBFP project cost schedule:

Collect all vendor quotes on a total-cost basis (inclusive of taxes). Quotes that show only pre-tax prices need to be grossed up. The lender disburses against invoices; the invoice total (including tax) is what is eligible.
Check the GST/HST registration status of every vendor. Most commercial vendors are GST/HST registrants and their invoices will include 5% GST or 13% HST (Ontario) or the applicable harmonized rate. Non-registrant vendors (small suppliers) cannot charge HST — their invoice price is the full cost.
Calculate the sub-limit check on a total-cost basis. The $500,000 non-RP sub-limit applies to total eligible costs including taxes. A project with $470,000 in pre-tax equipment and leaseholds may be at or near the sub-limit once HST is added.
Calculate the equity injection on total project cost. Most lenders require 10–25% equity on the total project cost including taxes. The equity injection discussion should be based on the tax-inclusive total.
Plan the ITC recovery into your working capital. The ITC on the HST component will come back — understand the timing (typically the GST/HST return for the period in which the expense is paid) and plan accordingly.

For the full list of eligible costs under CSBFP, see CSBFP eligible costs. For how the project budget is presented to the lender, see the CSBFP document checklist. For the equity injection requirement, see CSBFP equity injection: how much do you need.