The Goods and Services Tax Website and Services Tax or GST is a consumption tax which isn’t charged on most goods and services sold within Canada, regardless of where your business is situated. Subject to certain exceptions, all companies are required to charge GST, currently at 5%, plus applicable provincial sales taxation’s. A business effectively acts as an agent for Revenue Canada by collecting the taxes and remitting them on a periodic basis. Businesses furthermore permitted to claim the taxes paid on expenses incurred that relate of their business activities. These people are referred to as Input Tax Credit.
Does Your Business Need to Ledger?
Prior to participating in any kind of business activity in Canada, all business owners need to figure out how the GST and relevant provincial taxes apply to the group. Essentially, all businesses that sell goods and services in Canada, for profit, are required to charge GST, except in the following circumstances:
Estimated sales for that business for 4 consecutive calendar quarters is expected to be less than $30,000. Revenue Canada views these businesses as small suppliers usually 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. organization with annual sales less than $30,000 is not had to have to file for GST, in some cases it is beneficial to do so. Since a business is able to claim Input Tax credits (GST paid on expenses) if considerable registered, many businesses, particularly in the start up phase where expenses exceed sales, may find them to be able to recover a significant quantity of taxes. This ought to balanced against the opportunity competitive advantage achieved from not charging the GST, and the additional administrative costs (hassle) from in order to file returns.