The Goods and Services Tax or GST is a consumption tax much more charged on most goods and services sold within Canada, regardless of where your business is situated. Subject to certain exceptions, all businesses are required to charge GST, currently at 5%, plus applicable provincial sales taxes. A business effectively acts as an agent for Revenue Canada by collecting the required taxes and remitting them on a periodic basis. Businesses will also permitted to claim the taxes paid on expenses incurred that relate to their business activities. Components referred to as Input Tax Credits.
Does Your Business Need to File?
Prior to going into any kind of business activity in Canada, all business owners need to figure out how the GST and relevant provincial taxes apply to them. Essentially, all businesses that sell goods and services in Canada, for profit, should always charge GST, except in the following circumstances:
Estimated sales for the business for 4 consecutive calendar quarters is expected to be less than $30,000. Revenue Canada views these businesses as small suppliers and perhaps they are therefore exempt.
The business activity is GST exempt. Exempt Goods and Services Tax Website and services includes residential land and property, child care services, most health and medical services etc.
Although a small supplier, i.e. an individual with annual sales less than $30,000 is not must file for GST, in some cases it is good do so. Since a business can only claim Input Tax credits (GST paid on expenses) if these kinds of are registered, many businesses, particularly in start off up phase where expenses exceed sales, may find them to be able to recover a significant involving taxes. This ought to balanced against chance competitive advantage achieved from not charging the GST, this substance additional administrative costs (hassle) from in order to file returns.