Homeis
Popular searches
Family & Kids
Food & Drinks
Legal
Essentials
Health
Lifestyle
Travel
Finance
GST/HST Credit in Canada

GST/HST Credit in Canada

The Federal GST (Goods and Services Tax), a 5 percent tax on most Canadian goods and services, began on January 1, 1991, replacing the hidden 13.5% Manufacturer's Sales Tax.

It was supposed to improve and streamline the tax system, particularly for export businesses.

Unfortunately not all provinces signed on to merge their existing provincial sales tax regimes with the GST, forcing business owners to file both GST and Provincial Sales Tax (PST) returns. Provinces that did combine their sales taxes with the GST charge what is known as the Harmonized Sales Tax (HST).


GST/HST Registration for Your Business

You do not have to register for the GST/HST if you provide only GST/HST exempt goods and services. Examples of GST/HST exempt goods and services include child-care services, music lessons, and used residential housing. You do not have to register for the GST/HST if you qualify as a small supplier according to the Canada Revenue Agency (CRA), and are not one of the exceptions to the small supplier rule.


How to Register for the GST/HST

GST registration with the Canada Revenue Agency (CRA) is the easy part. You can register by phone, online, by mail or drop into your local CRA office. (In Quebec, remember, you need to contact the Ministère du Revenu du Québec (MRQ) instead of the Canada Revenue Agency for GST registration. Their phone number is 1-800-567-4692.) When you've registered, you'll be assigned a Business Number, a business identification number that you'll use for all your dealings with the CRA.

You do not have to register for the GST/HST if you provide only GST/HST exempt goods and services. Examples of GST/HST exempt goods and services include child-care services, music lessons, and used residential housing. You do not have to register for the GST/HST if you qualify as a small supplier according to the Canada Revenue Agency (CRA), and are not one of the exceptions to the small supplier rule.


Voluntary GST/HST Registration Has Benefits

Even if you do qualify as a small supplier, you may want to register for the GST anyhow. No matter what kind of business you're in, you will be paying GST/HST on the taxable goods and services you use in the course of your commercial activities. If you are a GST/HST registrant, you will be able to recover some of the GST/HST you paid out on business purchases back through Input Tax Credits.

If you don't register for the GST/HST, you have no way of getting back any of the GST/HST you paid out. For most small businesses, the amount of GST/HST paid to acquire supplies and services over the course of a year is considerable, so GST/HST registration makes economic sense.


The Rules for Claiming GST/HST Input Tax Credits

The rules for claiming GST/HST Input Tax Credits are very similar to the rules for claiming business expenses on income tax. According to the Canada Revenue Agency's General Information For GST/HST Registrants' Guide, you may claim Input Tax Credits for operating expenses such as commercial rent, utilities, and office supplies, and for meal and entertainment expenses. You may also claim GST/HST Input Tax Credits for expense reimbursements you pay to your employees or partners. And you can claim Input Tax Credits for a capital property as well.


Expenses That Don't Qualify as Input Tax Credits

Some purchases or expenses cannot be used to claim Input Tax Credits. The main category of purchases or expenses that can't be used are goods and/or services that you bought or imported for your own use (as opposed to being bought or imported for business consumption).

Some of the other purchases or expenses that don’t qualify are:

taxable goods and services bought or imported to provide exempt goods and services

some capital property

"membership fees or dues to any club whose main purpose is to provide recreation, dining, or sporting facilities" (CRA).


GST/HST Exempt and Zero-Rated Goods and Services

As a business, you charge the consumer no GST/HST on GST exempt or GST zero-rated goods and services, but the two classes of goods are different when it comes to Input Tax Credits. With GST exempt goods and services, you do not charge GST/HST and you cannot claim Input Tax Credits. With GST/HST zero-rated goods and services, you charge 0% GST/HST and you can claim Input Tax Credits.


GST/HST exempt goods and services include childcare services, music lessons, many educational services, and used residential housing.

For details on these and more examples, see the Canada Revenue Agency's list of GST exempt goods and services in RC4022 - General Information for GST/HST Registrants. Zero-rated goods and services include basic groceries, prescription drugs, and exports.

 


84 Saved
1 Comment
Narinder · Oct 25, 16:25
Good 1
Like
 Reply