Goods and Services Tax or GST is really a consumption tax that is charged on most services and goods sold within Canada, wherever your company is located. Be subject to certain exceptions, all businesses are required to charge GST, currently at 5%, plus applicable provincial sales taxes. An enterprise effectively acts as a representative for Revenue Canada by collecting the required taxes and remitting them with a periodic basis. Companies are also permitted to claim the taxes paid on expenses incurred that report for their business activities. These are generally termed as Input Tax Credits.
Does Your company Need to Register? Just before doing just about any commercial activity in Canada, all business people need to see how the GST and relevant provincial taxes connect with them. Essentially, all businesses that sell products and services in Canada, to make money, must charge GST, with the exception of the next circumstances:
Estimated sales for the business for 4 consecutive calendar quarters is anticipated to be less than $30,000. Revenue Canada views these businesses as small suppliers and they are therefore exempt.
The business activity is GST exempt. Exempt services and goods includes residential land and property, nursery services, most medical and health services etc.
Although a small supplier, i.e. a business with annual sales below $30,000 is not required to produce GST, occasionally it can be best for do this. Since a small business is only able to claim Input Tax Credits (GST paid on expenses) if they’re registered, many businesses, specially in the start-up phase where expenses exceed sales, may find actually in a position to recover a lot of taxes. How’s that for balanced from the potential competitive advantage achieved from not charging the GST, and also the additional administrative costs (hassle) from being forced to file returns.
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