Items and Services Tax or GST is often a consumption tax which is charged of many goods and services sold within Canada, regardless of where your company is located. Susceptible to certain exceptions, all companies are needed to charge GST, currently at 5%, plus applicable provincial sales taxes. A company effectively serves as an agent for Revenue Canada by collecting the taxes and remitting them over a periodic basis. Businesses are also able to claim the taxes paid on expenses incurred that report to their business activities. They’re known as Input Tax Credits.
Does Your small business Need to Register? Just before starting virtually any commercial activity in Canada, all business people have to decide how the GST and relevant provincial taxes apply to them. Essentially, every business that sell goods and services in Canada, to make money, have to charge GST, with the exception of these circumstances:
Estimated sales for your business for 4 consecutive calendar quarters is anticipated to be under $30,000. Revenue Canada views these firms as small suppliers and they’re therefore exempt.
The organization activity is GST exempt. Exempt goods and services includes residential land and property, day care services, most medical and health services etc.
Although a smaller supplier, i.e. a business with annual sales less than $30,000 isn’t needed to file for GST, sometimes it’s best for achieve this. Since a small business are only able to claim Input Tax Credits (GST paid on expenses) if they are registered, many organisations, mainly in the start up phase where expenses exceed sales, might find that they’re in a position to recover a significant amount of taxes. This has to be balanced up against the potential competitive advantage achieved from not charging the GST, as well as the additional administrative costs (hassle) from the need to file returns.
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