Why is it important to return GST/HST?

If you're running a business and you are wondering if it's a good idea to submit GST/HST on time, the answer is "YES"...

Jan. 25, 2022

You are required to return GST/HST to CRA after collecting it. Depending on your business situation, you can replace it annually, monthly, or quarterly. You cannot keep these funds to yourself as it is taken from someone, and it is a 'trust fund' that CRA treats very seriously. If you file late GST/HST or have submitted it incomplete or inaccurate, CRA will take action against you and charge you the penalties according to your situation. Let’s discuss the possibilities that happen when you fail to submit GST/HST according to the rules given by CRA.

Penalties for filing late GST/HST

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"The tax code is a monstrosity and there’s only one thing to do with it. Scrap it, kill it, drive a stake through its heart, bury it and hope it never rises again to terrorize the American people."–Steve Forbes

Fail to file for late GST/HST

If you fail to submit your GST/HST or if you are filing late, i-e; after the required time to indulge, CRA will charge your company with a penalty which is:

A+ (B*C)

A is 1% of the amount you owe

B is 25% of A

C is the number of complete months the return is overdue, to a maximum of 12 months.

For example; suppose your company owes 30,000 in GST/HST, and you are eight months late in submitting the amount you would owe:

1% of 30,000= $300

(25% of$300)*8= $600

$300+$600= $900 penalty.

Demand to file

If CRA demands you to submit general sale tax and you fail to submit it, CRA will give you a penalty to raise $250.

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"Make sure you pay your taxes; otherwise you can get in a lot of trouble."–Richard M. Nixon

Fail to submit electronically

If you fail to submit your GST/HST online, CRA will charge you $100 for the first offense, and the charges will increase to $250 if you fail to submit the taxes in the first offense.

Fail to file correct information

CRA  will charge you the penalty of 5% of the amount plus 1% of the difference between what is reported and what should have been reported until the amounts are adjusted (to a max of 10%) if:

  • You fail to provide correct information
  • you fail to provide the information of amounts correctly, i-e, over/under-reporting of charges (over-reporting of loss and under-reporting of profits)
  • you fail to provide correct information of amounts by mistake

Interest on late submission of GST/HST

The GST/HST return interest will be charged if you are paying it late or partially. Two types of interest apply on GST/HST depending on the debt. Let's discuss the situations when interest has to be paid.

Arrears interest

If you fail to submit GST/HST to the receiver-general, including an outstanding balance on GST/HST, CRA will charge you the interest, which is calculated every three months using the prescribed daily compounded interest rate. 

Installments interest

If you fail to make installment payments by the due date, you may be charged installment interest at the 90-day Treasury bill rate + 4% until the total amount and increased interest is paid.

Refund interest

 

There are the charges applied on the late/unpaid GST/HST return or outstanding/overdue debts. There is a benefit for those who have a refund or are paid extra than their liability. They will get the refund interest.

On an overpayment or refund of net tax claimed on a GST/HST return, CRA shall pay you daily compounded interest starting from 30 days from the day you file the refund claim on your tax return. The interest receivable is calculated until the refund is paid or applied. Then, the interest rate is calculated every three months using the prescribed daily compounded interest rate.

FOR YOU

Register your business in Canada today

GET STARTED

"All taxes discourage something. Why not discourage bad things like pollution rather than good things like working or investment?"–Lawrence Summers

Wrapping it up!

It's tough to afford penalties and interests to be paid, so try to submit HST/GST on time to avoid facing penalties. Yogi & Associates provides the solutions to these problems. Yogi and associates have a staff of professionals and accountants familiar with this process and help you figure out if you are facing penalties or find ways to avoid these penalties as much as possible.

Rafia Khalil

Executive Journalist

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