In Canada, most businesses are required to collect the goods and services tax on the taxable supplies and services that they sell. Companies that fail to collect and remit the GST and that fail to file their returns can be heavily penalized. It is important for companies to understand the GST and whether it applies to them so that they can comply with the law.
Table of Content:
- What Is GST?
- For Which Services or Goods Should I Charge GST?
- When Do I need to Register GST?
- When Should I Start Charging the GST?
- How to Apply for a GST Account?
- How to File a GST Return?
- How to Calculate GST?
- What Is the Deadline for Filing GST?
- How to Complete the GST Remit?
- The benefits of partnering with Ensight Cloud CPA.
What Is GST?
The GST is a type of tax that is charged on most types of goods and services, including many types of real property and intangible property, that are made and sold in Canada. While some provinces have blended provincial sales tax with the GST for the harmonized sales tax, British Columbia has not. Instead, covered companies in BC must collect and remit both the PST and the GST. GST registrants are required to collect the GST at the time that sales of certain goods and services are completed.
For Which Services or Goods Should I Charge GST?
The GST applies to most types of supplied or imported property and services in Canada.
It applies to taxable supplies that are not zero-rated. Some examples of taxable supplies include the following:
- Automobile sales and leases
- Vehicle repairs
- Commercial real property leases and sales
- New housing sales
- Clothes and shoes
- Potato chips and soft drinks
- Accounting and legal services
- Commercial ride-share and taxi services
- Hotel accommodations
- Barber and salon services
Certain types of supplies in Canada are zero-rated, which means that the applicable GST rate is 0%. For these supplies, the GST is not charged. However, you might be able to claim input tax credits for the GST that you pay on services and property to provide the zero-rated supplies. Some examples of these goods include the following:
- Staples such as bread, milk, and vegetables
- Agricultural products
- Fishery products
- Most livestock
- Prescription drugs
- Artificial teeth and hearing aids
- Feminine hygiene products
- Exports of goods and services
- Transportation services in which the destination or origin is outside of Canada
Finally, some types of supplies are exempt, which means that the GST does not apply to them. For these supplies, you won’t charge the GST and will not be able to claim input tax credits for them. If your company only offers exempt supplies, you are generally not allowed to register for the GST. one exception to this general rule is for listed financial institutions that are residents of Canada. The following are examples of exempt supplies:
- Sales of residential housing other than new housing
- Residential leases and condominium fees
- Medical, dental, and health services performed by doctors or dentists for medical purposes
- Child care services to care for children who are 14 years old or younger
- Legal aid services
- Domestic ferry services
- Vocational education and tutoring services
- Music lessons
- Most financial services
- Issuing insurance policies
- Services and property provided by public institutions and charities
- Standard residential services such as water
When Do I need to Register GST?
If you are not a small supplier, and you make taxable supplies, leases, or sales in Canada, you will need to complete GST registration. Small suppliers include sole proprietors, partnerships, and corporations with total revenues of $30,000 or less in the prior four consecutive quarters or in any single quarter. Public service bodies with total revenues from their taxable supplies from all of their activities that total less than $50,000 in a single quarter and in the last four quarters are also considered to be small suppliers. For charities and public institutions, the threshold for total revenues is $250,000.
When you will need to register for the GST will depend on when you exceed the small supplier threshold of $30,000. If the total revenues of your business exceed the threshold in a single calendar quarter, you must register and collect the GST on the supplies that exceeded the threshold amount. The effective date of your registration occurs on the day that the sale of a supply caused your business to exceed the small supplier threshold. From the day that a sale caused you to exceed the threshold, you will have 29 days to register for the GST.
If your sales exceed the threshold in four or fewer consecutive calendar quarters following a quarter in which you were under the threshold, you will be considered to be a small supplier during those quarters and for a month following them. The effective date of your registration will then be the date that your first supply was completed after you stopped being a small supplier. You will then have 29 days to register.
When Should I Start Charging the GST?
If you are a small supplier with revenues that do not exceed $30,000 in a quarter, you are not required to register. However, it might be beneficial for you to voluntarily register if you make taxable leases or sales or provide other taxable supplies in British Columbia. The effective date of your registration will normally be the date that you request a GST account or up to 30 days before it. You should begin charging and collecting the GST beginning on the date that you request a GST account.
If your revenues exceed $30,000 in a single quarter, you are not a small supplier and are required to charge GST on any supplies that make you go over the threshold within the quarter. GST registration will be required, and the effective date is the date that the supply triggered you to exceed the threshold. You will be required to begin charging GST on supplies that make you go over $30,000 for the quarter.
If your company exceeds the $30,000 threshold over the past 4 consecutive calendar quarters but does not do so in a single quarter, you are not considered to be a small supplier in the month that follows the quarter in which you exceeded the threshold and will be required to register. The effective date of your registration will be the beginning of the next month after you ceased being a small supplier. You will be required to begin charging the GST on taxable supplies beginning on your registration’s effective date.
How to Apply for a GST Account
The first step to registration is to obtain a business number from the Canada Revenue Agency. Incorporated companies likely already have BNs and accounts for their corporate income taxes. To request a business number and to open a GST account, you can register online through the CRA’s business registration portal. Alternatively, you can download and complete the Form RC1 and send it to the CRA.
When you register for the GST, the CRA will assign a reporting period to your company based on its taxable goods and supplies. The reporting period may be on a monthly, quarterly, or annual basis. You will need to submit GST returns according to your assigned reporting period. You are required to file a return even if you have not conducted any business or collected GST during that period.
How to File a GST Return
The GST return can be filed by Telefile, mail, or online. Certain registrants must file their returns online. You will receive a personalized return that has the due date printed at the top of the form. If you file your GST return online, you should use the working copy so that you can print and keep a copy for your business records.
After you have entered your data, you will be asked to confirm it before you file it. Once you file it online, you will receive a confirmation number.
How to Calculate GST
The GST is 5% throughout Canada for taxable goods and services. In addition to the GST, businesses in British Columbia will also have to separately calculate the PST and remit it to the province. You can use a GST calculator from the CRA to help to calculate GST. When you complete your return, you will calculate the GST and the net tax by taking advantage of the input tax credits that you have earned. The input tax credits allow you to recapture the GST that you have paid for expenses and purchases related to your commercial activities.
What Is the Deadline for Filing GST?
Your GST filing due date will appear at the top of your personalized GST return. The GST filing due date is dependent on your assigned reporting period. If you fail to file your GST return by the due date, you may be assessed penalties and interest. The return must be filed even if you have not completed any business transactions and do not have any GST net tax to remit. If the deadline falls on a weekend day or a public holiday, the return will be considered to be timely filed as long as the CRA receives it on the following business day.
How to Complete the GST Remit
You can complete your GST remit electronically, through your bank, or by mail. You can remit GST online through the CRA’s My Payment feature. This allows companies to make direct payments to the CRA from bank accounts that offer Interac Online.
You can also pay your GST through your bank’s telephone or internet services or authorize the CRA to debit a GST payment from your bank account. GST payments can also be paid at your bank with form RC158. This remittance voucher is not available online and must be requested from the CRA. Finally, you can send the remittance by cheque or money order that is made out to the Receiver General with your personalized GST return by mail. The address to mail it to will be printed on the back of the remittance voucher. If you choose this method, you should make certain to write your business number on the back of the money order or cheque to make certain that it is applied correctly. If your GST payment is $50,000 or more, you must either pay it electronically or at a bank.
The benefits of partnering with Ensight Cloud CPA
There are several benefits of partnering with our tax and accounting professionals for your GST returns. We can help to make certain that your company meets its filing and payment deadlines to avoid penalties. Working with our tax professionals can help to ensure the accuracy of your returns. We can make certain that you claim the input tax credits to which you should be entitled to help to reduce the total amount that you might have to pay. Contact us today to schedule a consultation and to learn more about the GST and the help that we can offer to your business.