Complete Guide to Filing GST/HST
Everything you Need to know About GST/HST For Your Business
If you’re starting your own business in Canada, you may have to register for a GST/HST account. Part of your duty as GST/HST registrant is to collect and remit these taxes to the Canada Revenue Agency.
However, filing your GST/HST can be more time-consuming and complicated than filing your income tax. It’s important to know the requirements to stay compliant with the law.
Table of Contents
What is GST/HST?
The Goods and Services Tax (GST) is a consumption tax applied to most goods and services in Canada. This tax is also imposed on the final sale of real estate and intangible personal properties.
A 5% GST is levied on most taxable items and services in Canada, except in provinces and territories categorized as “participating.” A participating province is a province in Canada that opted to blend its provincial sales tax with the GST.
The harmonization of the GST and the provincial sales taxes gave rise to the harmonized sales tax (HST) imposed on Canadian residents and businesses.
Below are the participating provinces in Canada with their respective harmonized sales tax rates:
- New Brunswick at 15%
- Newfoundland and Labrador at 15%
- Nova Scotia (N.S.) at 15%
- Ontario, with a 13%
- Prince Edward Island at 15%
When do I have to register for GST/HST?
Registration with the Canada Revenue Agency (CRA) for a GST/HST account is not mandatory for small businesses.
However, registration with the CRA for a GST/HST account is a must for businesses that sell taxable goods and services, with the total revenue from all of their operations exceeding $30,000 in any single calendar quarter in the last four consecutive quarters.
Moreover, a non-GST/HST registrant with total revenue of more than $30,000 in any four consecutive quarters will still need to pay GST/HST to the CRA.
When a business registers for GST/HST, it will be issued a Business Number (BN). The BN is used to identify the business for tax purposes and allows businesses to connect with other government programs and services.
For more information on registering for GST/HST, please visit the website of the Canada Revenue Agency.
Am I Required to Charge/Collect GST/HST?
GST/HST registrants must charge, collect, and remit GST/HST on their taxable supplies. They are also entitled to claim GST/HST rebates on eligible purchases made by the business.
Note that a business may still need to pay GST/HST on its operating expenses even if it remains unregistered.
A non-GST/HST registrant with total revenue of more than $30,000 in any four consecutive quarters must pay GST/HST to the CRA.
GST/HST Categories
Business owners must know which goods and services are subject to the GST/HST to charge their customers correctly. Understanding Canada’s taxable goods and services allow business owners to comply with the CRA.
As a guideline, the CRA provided the following GST/HST categories:
Taxable Supplies
Taxable supplies refer to transactions involving goods, services, and intangibles, which are not considered exempt or zero-rated under Schedules V and VI of the Excise Tax Act of Canada.
Some of the examples of taxable supplies include:
- real properties
- intangible personal property
- automobiles
- new housing
- hotel accommodations
- clothing
- legal and accounting services
Zero Rated Supplies
Zero-rated supplies are taxable supplies with a 0% GST/HST rate. Theoretically, business owners charge the indirect tax at a zero rate, yet, as suppliers, they are entitled to claim the total ITC on the GST/HST they paid to make the supplies.
The zero-rated supplies generally refer to necessities such as basic groceries, agricultural and fishery products, and prescription drugs.
Exempt Supplies
Businesses cannot charge GST/HST for exempt supplies sold to customers. Likewise, they cannot claim ITCs on their purchases to produce the exempt supplies.The exempt supplies generally include services that society would consider inappropriate to tax. Some exempt supplies include childcare services, school fees, insurance policies, and medical services. These types of services are exempt as social standards consider them inappropriate to tax.
If you have any questions regarding GST/HST filing, our team of tax experts will be happy to help you with any concerns you may have. Feel free to book a free consultation or give us a call at 647-655-8382 during our office hours.
Voluntary Registration for GST/HST
You may voluntarily register for a GST/HST account even if you are a small supplier, provided that you make taxable sales and supplies. As a GST/HST account registrant, you must:
- collect, and remit the GST/HST that applied to your property, goods, and services
- file GST/HST returns as required
- remain registered for at least a year before canceling your registration, except when you stop any commercial activities
One of the advantages of GST/HST registration is that even voluntary registrants are eligible to claim the ITCs. This can help small business owners to recover the indirect taxes paid on their purchase and operating expenses.
How Do I Start Reporting/Tracking My GST/HST?
After registering with the CRA, there are a few things you need to do to start reporting and tracking your GST/HST.
You’ll need to determine which of your goods or services are taxable. Once you’ve decided which of your products are taxable, you’ll need to charge your customers tax accordingly.
How to Calculate Your Net Tax
As a GST/HST registrant, you must calculate and report your net tax in your returns. To do so, your need to:
- a) determine the GST/HST collected or that became collectible on your taxable supplies during the reporting period;
- b) determine the GST/HST paid and payable on your business purchases and expenses. You can use this amount to claim an ITC.
Both of the items above can be accomplished with good bookkeeping. If the GST/HST collected is more than the GST/HST paid or payable, remit the difference to the CRA. Otherwise, claim a refund for the excess of your GST/HST paid or payable over the GST/HST collected.
GST/HST Filing FAQs
How do I file my GST HST return in Canada?
Filing a GST/HST return in Canada can be done electronically, by TELEFILE, or on paper. However, it is best to check firsthand if you are required to file online and which online method you can use before deciding on a filing method.
You can also use the GST/GST Return Working Copy to facilitate the preparation of your GST/HST return.
What is the GST HST filing deadline?
GST/HST registrants may choose to file their returns monthly, quarterly, or annual. The filing deadline for monthly and quarterly filers is one month after the end of the reporting period, while yearly filers must file and pay their tax three months after the tax year end.
How do I register for a GST HST business number?
Generally, business owners can register a GST/HST account by calling 1-800-959-5525 or online through the CRA’s business registration system. After registration, the registrant will receive an individual GST/HST number that will be included in the invoices.
What are input tax credits?
Input tax credits (ITCs) are a type of refundable tax credit that businesses can claim to recover the GST/HST paid or payable on certain expenses. ITCs can be claimed on eligible business costs such as products, services, and capital property purchased for use in your commercial activities.
What expenses are eligible for input tax credits?
In general, ITCs can be claimed at any expense related to your commercial activities. This includes business expenses such as office supplies, professional services, advertising, and rent.
How do I claim input tax credits?
To claim ITCs, you must keep accurate records of all your eligible expenses. This includes receipts, invoices, and other documentation showing the GST/HST paid or payable on an expense.
How can AgileCPA help with your return?
Like most people, the thought of tax season fills you with a sense of dread. But it doesn’t have to be that way!
AgileCPA is here to help you with all your tax needs, from computing and filing your GST/HST to claiming the ICTs. We’ll ensure you get the maximum refund you’re entitled to, so you can relax and enjoy the rest of your year.
So book an appointment today, and let us take the stress out of tax season!
