Introducing the GST/HST - Segment 5

Transcript

Host: Welcome to the segment called Introducing the GST/HST, part of the Starting Your Business video.

I'm your host Kathleen Sinclair.

This segment mentions links where you can get more information. You can find them in the Related links for this video.

With me is Laura Adams. Welcome Laura.

Subject matter expert: Thank you Kathleen.

Host: We're all familiar as customers with paying the GST/HST. For small businesses just starting up can you give a bit of background on the tax?

Subject matter expert: The goods and services tax, or GST as it's commonly known, is a tax that applies to most property and services supplied in Canada.

Some Canadian provinces harmonized their provincial sales tax with the GST to create the harmonized sales tax, or HST. These provinces are called the participating provinces. For an up‑to‑date list of participating provinces, go to the CRA's Definitions for GST/HST webpage.

Generally, the HST applies to the same base of property and services as the GST. Although the consumer pays the tax, businesses are generally responsible for collecting and remitting it to the government.

I'd like to note that, with the exception of selected listed financial institutions, Revenu Québec administers the GST/HST in Quebec. If your business is located in Quebec, go to www.revenuquebec.ca, or call 1-800-567-4692.

Host: I'm a new small business owner. Do I have to register for the GST/HST?

Subject matter expert: You have to register if you provide taxable supplies in Canada, and you no longer qualify as a small supplier.

Host: What do you mean by taxable supplies?

Subject matter expert: Taxable supplies are property and services that are supplied in the course of a commercial activity and are subject to the GST/HST.

Host: You mentioned that a business must register if it provides taxable supplies and is no longer a small supplier. How do I know when I am no longer a small supplier and I therefore need to register for a GST/HST program account?

Subject matter expert: A main factor in determining if you are no longer considered a small supplier is whether you have exceeded the small supplier threshold

The small supplier threshold is $30,000 in worldwide taxable supplies made by you and persons associated with you in a single calendar quarter or in four consecutive calendar quarters.

The effective date of your GST/HST registration depends on when you go over the small supplier threshold amount of $30,000.

If you exceed the threshold amount in one calendar quarter, your effective date of registration is the day of the taxable supply that made you exceed the threshold amount.

If you don't exceed the threshold amount in one calendar quarter, but you exceed it in four consecutive calendar quarters, you cease to be a small supplier at the end of the following month. Your effective date of registration is the day you made your first taxable supply after that month.

Host: Are there any situations where you are required to register for a GST/HST account even if you haven't reached the $30,000 in taxable supplies?

Subject matter expert: There are some situations where you have to register even if your taxable supplies don't exceed $30,000.

For example, taxi and limousine businesses are required to register for the GST/HST.

For more information, go to the CRA's Mandatory registration webpage.

Host: Laura, you mentioned mandatory registration; is there any reason why a business owner would want to register for a GST/HST account voluntarily

Subject matter expert: Well Kathleen, there are a number of reasons why you may want to register for a GST/HST account even though you don't have to. For example:

  • you may want to claim input tax credits to recover the GST/HST you pay or owe on your business purchases or on property your business has on hand when you become a registrant;
  • once your business is operational, you may want to register before your total worldwide revenues of taxable goods and services exceed $30,000; or
  • perhaps your clients may only choose to do business with businesses that are registered for the GST/HST.

Host: If I voluntarily register for a GST/HST account, when do I need to start collecting?

Subject matter expert: If you register voluntarily, you must start collecting the GST/HST on taxable supplies right away. You can't wait until you reach the $30,000 threshold.

For more information, go to the CRA's voluntary registration webpage.

There is also information in the Registration chapter of the GST/HST Memoranda Series that covers required registration, small suppliers, and voluntary registration. 

Host: Laura, you mentioned the term "input tax credits." Just what are input tax credits?

Subject matter expert: Well, if you are registered for the GST/HST, you can recover the GST/HST paid or payable on your purchases and expenses related to your commercial activities by claiming an input tax credit.

You claim an input tax credit, or ITC for short, to recover the GST/HST paid or payable for goods or services acquired in or imported into Canada, or brought into a participating province, for use, consumption, or supply in the course of your business' commercial activities.

For more information on ITCs, refer to the chapter called Input Tax Credits: Eligible ITCs, in the GST/HST Memoranda Series that covers general eligibility rules, general restrictions and limitations.

Host: Let's say we have a new small business whose owner registered for a GST/HST account but the business hasn't started up yet. Does the business owner need to file or can they just wait until they start making taxable supplies?

Subject matter expert: Once a business owner has registered for a GST/HST program account, they have to file GST/HST returns even if all amounts on the return are nil. In other words, even if the business has no business transactions in a reporting period, it still has to file a nil return.

Host: What if a business owner registered for the GST/HST less than a year ago, and based on sales to date, will not reach the $30,000 small supplier threshold? Is the business allowed to cancel the GST/HST registration?

Subject matter expert: Once a business is registered, it has to remain registered for at least one year and file all GST/HST returns before it can cancel its registration.

Host: Are all goods and services taxed at the same rate?

Subject matter expert: Taxable supplies of goods and services made in participating provinces are taxed at the applicable HST rate for that province. For example, rates are 15% for Nova Scotia, 14% for Prince Edward Island, and 13% for Ontario, New Brunswick, and Newfoundland and Labrador. Taxable supplies of goods and services made in non-participating provinces are taxed at the GST rate of 5%.

Goods or services can also be taxable at 0% or they can be tax-exempt.

Host: What goods and services are taxable?

Subject matter expert: Taxable supplies are goods and services that are supplied in the course of a commercial activity and are subject to the GST/HST, including zero-rated supplies.

Host: Zero-rated? What does this mean?

Subject matter expert: Zero-rated means supplies that are taxable at zero percent. For example, basic groceries like bread, milk, and produce are taxed at 0%. Prescription drugs and medical devices are also taxed at 0%

It means that the business does not charge GST/HST on zero-rated supplies. But it can claim an input tax credit for the GST/HST it paid or owes on expenses related to providing these supplies.

Host: What is meant by "exempt supplies"?

Subject matter expert: When goods or services are exempt, it means that, even if you are registered for the GST/HST, you don't charge GST/HST on these goods or services. Also, you can't claim input tax credits for GST/HST you paid or owe on expenses made to provide exempt supplies.

Examples of goods and services that are exempt include residential rents, most health and dental services, daycare services, and most financial services.

Host: In the case of zero-rated and exempt goods and services, I'm not charging GST/HST on them. So what's the difference?

Subject matter expert: The difference for you, if you are a GST/HST registrant, is that although you don't collect GST/HST on either exempt or zero‑rated goods and services, you can still claim input tax credits for purchases and expenses incurred to provide zero-rated goods and services.

However, you can't claim input tax credits to recover the GST/HST you paid on expenses related to making exempt supplies.

For more information on what is meant by taxable, zero-rated, and exempt supplies, go to the CRA webpage on this topic.

Host: If I have registered for the GST/HST, how will I know when to file a GST/HST return?

Subject matter expert: The CRA assigns you a reporting period when you register for a GST/HST account. If you have taxable supplies of $1.5 million or less, the CRA will assign you an annual reporting period. Depending on your situation, you may be able to request a more frequent reporting period.

You might also have to use a specific method for filing your GST/HST return and for remitting any amount owing.

For more information on the different filing and remitting options and requirements, go to www.cra.gc.ca/gsthst.

For general enquiries on the GST/HST, call 1-800-959-5525.

For technical enquiries on the GST/HST, call 1-800-959-8287.

Host: Thank you, Laura.

This concludes the segment called Introducing the GST/HST, part of the CRA's Starting Your Business video.

Thank you for watching.

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