How It Works
Step 1: Provisional Rate
During the year, use prior year's recovery percentage to claim input tax. This is your provisional rate. For new businesses, estimate based on expected supply mix.
Step 2: Actual Calculation
At year-end, calculate actual recovery percentage based on actual taxable vs total supplies. Compare with provisional rate used throughout the year.
Step 3: Adjust
If actual % differs from provisional %, make a one-time adjustment in the last return of your tax year. Positive difference = additional input claim. Negative difference = additional output liability.