Canadian GST

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In Canada, there are various kinds of value added tax and the most profound is the GST standing for Goods and Services Tax. GST is a multi-level value added tax that was introduced in the country on 1st January 1991. The tax system was introduced by the Prime Minister serving then, Brian Mulroney and the finance minister Michael Wilson. Goods and Services Tax replaced the hidden 13.5 percent MST, which standards for Manufacturer’s Sales Tax. The reason GST replaced MST was because it was impairing the ability of the manufacturing sector in the country to have a competitive playground for exporting goods and services. Today, the GST rate is at 5%, a figure that became effective on 1st January 2008. 

The Goods and Services Tax applies to most goods and services sold in Canada. However, despite this levy, some provinces still uphold provincial sales taxes and in this case, GST is charged on top of the provincial retail taxes. For example, provinces such as British Columbia, Manitoba, and Saskatchewan have both GST and Provincial Sales Tax (PST). Some other provinces including Ontario, PEI, New Brunswick, Nova Scotia, Labrador, and Newfoundland have combined both GST with PST to have what is known as Harmonized Sales Tax (HST).

The provinces that do not have provincial sales tax, they use GST. The harmonized sales tax and provincial sales tax rates are different for each province and a lot of products and services are exempted from the levy. It may be quite difficult for you to know what exactly you need to do and therefore invoicing is a big headache for businesses. However, you may want to look out for the PST, GST as well as the HST rates for the different provinces.

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Canadian GST Exempts and Zero-Rated Items 

Some of the items that may be exempted from GST include residential rent, sale of a used residential housing in the event that the owner isn’t the builder and there has been no substantial renovation done on the building. Exempts from GST may also be allowed on residential condominium fees, dental and medical services, college and university courses, toll charges, music lessons, and government or municipal services including licenses, recycling collection, garbage collection, sewerage, and water distribution. There are also zero-rated items where a purchaser may not pay GST for example basic groceries, prescription drugs, and medical devices. However, a seller may claim ITC credits for GST that was paid on expenses and purchases relating to the sale of such zero-rated items. 

Registering for Canadian GST

You will need to have a business number (BN) for you to register to collect GST. You may register online by visiting the Canada Revenue Agency (CRA) website. Even if you are registering a business or corporation, you will need to provide your personal information and other details regarding the business. Another way you can register is by phone. What you need to do is call CRA at CRA at 1-800-959-5525.

If you are registering for GST in Quebec, you will need to go to the webpage Quebec at http://www.revenuquebec.ca/en/sepf/services/sgp_inscription/default.aspx.

You may also register by phone at 1-800-567-4692.

Before registering for GST account, you may want to find out if you are required to do so or not. If you provide only exempted goods and services, then you cannot register for the tax account. You, however, are required to register for GST if you provide taxable supplies within Canada unless the supplies are connected with real property that has been sold other than during the course of the business. You also need to register if you aren’t classed as a small supplier.

You are a small supplier if your business sales don’t exceed a threshold of $30,000 within four consecutive calendar quarters. However, you may decide to have voluntary registration in the event that you provide taxable supplies within Canada. If your sales exceed $30,000 limit in a single calendar quarter, then you are not classed as a small supplier. You actually cease being a small supplier on the month that you exceeded the limit for a small supplier and therefore, you are required to register for GST within a period of 29 days from that supply, which crossed you over from the small supplier limit.

Once you register for GST account, you will be issued with a GST number that you pay your tax against. You will need to confirm the number once you have registered so that you make sure it is the correct one.

In voluntary GST registration, you should ensure that you charge and collect as well as remit the GST applying on the taxable supplies including property and services. You should also file GST returns regularly and have to remain registered for 12 months before cancelling the registration, or unless you stopped the commercial activity, you were taking. When registered, you can claim your input tax credit (ITC) for the GST paid and payable on purchases and operating expenses you made.  

Remitting GST Amounts

When you want to remit the GST amounts, you should know your GST filing period. It may be monthly, quarterly, or annually. When choosing a method of GST payment, you can go for electronic method, or pay at a financial institution, or remit by mail. If you are remitting a payment of $50,000 or more, that should be done electronically, but you may also pay at a financial institution. You cannot pay that kind of amount by mail. In electronic payment of your GST, you can go to the CRA’s “My Payment” option where you make payments online right from an account using CRA website platform. 

You can use a Canadian GSA calculator to calculate the amount of tax you should remit. This makes the process easy for you rather than struggling with the manual calculations. When using the calculator, you have to select the province or territory because there may be different rates or systems used for example, the Harmonized system. 

Applying For GST Rebate

Before you apply for GST rebate, you want to first determine if you’re eligible depending on your specific situation. Business persons may apply for rebates on GST amount paid if there were errors when they were charging the GST or if they paid for a non-taxable item.

You can visit the Canada Revenue Agency website to find out if you are eligible or not – just go to https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/gst-hst-rebates/general-gst-hst-rebate-application.html

If you, for example, paid a certain amount as GST and you discover there was some error you made to the supplier, you may contact the supplier to give you a refund or credit of that amount. If that works out, then you don’t have to apply for GST rebate, and that’s usually the easiest and simplest way to recover your money. But should the supplier fail to refund you or credit that amount, you can apply for the rebate to the CRA.

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