GST Considerations For New Business Owners

The Goods and Services Tax Website and Services Tax or GST is a consumption tax which charged on most goods and services sold within Canada, regardless of where your business is positioned. Subject to certain exceptions, all businesses are required to charge GST, currently at 5%, plus applicable provincial sales income taxes. A business effectively acts as an agent for Revenue Canada by collecting the required taxes and remitting them on a periodic basis. Businesses furthermore permitted to claim the taxes paid on expenses incurred that relate inside their business activities. Tend to be some referred to as Input Tax Credit.

Does Your Business Need to Register?

Prior to going into any kind of economic activity in Canada, all business owners need to figure out how the GST and relevant provincial taxes apply to these guys. Essentially, all businesses that sell goods and services in Canada, for profit, should charge GST, except in the following circumstances:

Estimated sales for the business for 4 consecutive calendar quarters is expected to become less than $30,000. Revenue Canada views these businesses as small suppliers and consequently are therefore exempt.

The business activity is GST exempt. Exempt goods and services includes residential land and property, child care services, most health and medical services and many others.

Although a small supplier, i.e. an online-business with annual sales less than $30,000 is not required to file for GST, in some cases it is good do so. Since a business in a position to 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 that possibly they are able to recover a significant amount taxes. This is balanced against prospective competitive advantage achieved from not charging the GST, plus the additional administrative costs (hassle) from in order to file returns.