7 Easy Ways To Understand GST/HST in Canada

by | Jun 3, 2022

Do you know what the GST/HST in Canada is? Understanding GST/HST for small firms might be challenging, particularly if you own a small business in Mississauga. And have little to no experience with tax requirements.

In this guide, we will examine the following topics related to GST/HST in Canada:

  • Knowing why to register your business for GST/HST
  • Methods for GST/HST registration
  • Recognizing which goods and services are exempt from GST/HST
  • Valuable bookkeeping tips for maintaining your company in compliance with GST/HST.

1. What is GST?

Most items sold in Canada are subject to a 5% goods and services tax (GST). Therefore, businesses must notify the Canada Revenue Agency of the GST on their products.

2. What is HST?

Some provinces produce a harmonized sales tax (HST) by combining the GST and their provincial sales tax (PST). You can register for HST as soon as your business is registered for GST.

Five provinces in Canada now use the HST:

Provinces HST
New Brunswick 15%
Newfoundland and Labrador 15%
Nova Scotia 15%
Ontario 13%
Prince Edward Island 15%

3. Who is Eligible For GST/HST in Canada?

In general, if you are regarded as a Canadian resident for income tax purposes in the month before and at the start of the month in which the Canada Revenue Agency makes a payment, you are eligible for the GST/HST tax.

You must also fulfill one of the following requirements:

  • You must be at least 19 years old
  • Have a spouse or common-law partner
  • Or a parent who has lived with their child for at least one year.

4. Why Do You Need To Register for GST Account?

Every business in Canada needs to register for a GST/HST account. For the following reasons, you must register for a GST account:

  • You are not a small supplier. A small supplier is someone whose income from all taxable supplies equals or less than $30,000.
  • If you don’t register, your company won’t be able to claim Income Tax Credits (ITCs) for expenses. And would be subject to significant tax penalties for failing to file GST/HST reports on time.

We don’t need new taxes. We need new taxpayers, people that are gainfully employed, making money and paying into the tax system.” – Marco Rubio

5. How to Register for GST/HST Number?

To initiate the registration process for the GST, you have to apply to the Canada Revenue Agency. You can do registration in three ways. These are as follows:

1. Online Method.
2. By Phone.
3. By Email.

Remember!

Each GST/HST registrant must gather and send the taxes due on the taxable supplies they deliver to the CRA.

Once the GST/HST account registration completes, you can collect and remit the HST or GST. For more information on collecting GST/HST, please check our article, When Should You Charge GST/HST? 2022 Free Guide

6. Which Supplies Are Exempt From GST/HST?

Products and services that are excluded from GST tax are known as exempt supplies. There are two different categories of exempt supplies. Exempt and zero-rated supplies.

Exempt Supplies

These are the gods and services where all the items are free of tax. Also, you cannot claim input tax on exempt supplies. 

Few examples of exempt supplies include:

  • Most medical and healthcare services.
  • Services for children under the age of fourteen in daycare.
  • Several educational services
  • Used residential house for sale.
  • Music Lessons
  • Most charities, governments, non-profit organizations, towns, and other suppliers of public services.

Zero-Rated Supplies:

For typically taxable items, the CRA charges zero tax. Although these items charge you zero rates, you can still claim the input tax credits. The following is a list of items that are zero-rated:

  • Tractors, machinery, and other items used in agriculture are zero-rated.
  • Pharmaceuticals: pills or prescription medications.
  • Medical equipment that accommodates a disabled person includes hearing aids, wheelchairs, canes, and vehicle modifications. Urinary catheters, insulin pumps, syringes, and pens are also included.
  • Tampons, feminine hygiene products, and sanitary supplies.
  • Products derived from the fishing sector.
  • For human consumption, farm animals are sold. However, animals used for pets or breeding, such as dogs, cats, or horses, will not be zero-rated.
  • Meat, dairy, veggies, tea, and coffee are all part of basic groceries. But leave out candy, drinks, alcohol, and snacks.

7. Tips For Staying Compliant With GST/HST In Canada

Ensure your sales tax systems (including exempt and zero-rated codes) are working correctly so that your GST/HST net tax computations and transfers are accurate. Additionally, you must periodically track and evaluate your revenue. This way, you can know when to register for GST/HST.

Many small business owners may find it difficult and time-consuming to manage bookkeeping. Not to worry! Because Yogi & Associates provides small business owners in Mississauga, Brampton, and surrounding areas with efficient bookkeeping services.

If you are looking for an expert bookkeeper, please contact us immediately. And discover how we can help you!

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