The products and Services Tax or GST is often a consumption tax which is charged of all goods and services sold within Canada, where ever your business is located. Susceptible to certain exceptions, all businesses must charge GST, currently at 5%, plus applicable provincial sales taxes. A business effectively serves as a realtor for Revenue Canada by collecting the required taxes and remitting them with a periodic basis. Companies are also allowed to claim the required taxes paid on expenses incurred that report for their business activities. These are generally termed as Input Tax Credits.
Does Your organization Have to Register? Just before participating in any type of commercial activity in Canada, all business people should decide how the GST and relevant provincial taxes apply to them. Essentially, all businesses that sell services and goods in Canada, for profit, are needed to charge GST, except in the following circumstances:
Estimated sales for your business for 4 consecutive calendar quarters is expected to get lower than $30,000. Revenue Canada views these firms as small suppliers and they are therefore exempt.
The business enterprise activity is GST exempt. Exempt products and services includes residential land and property, child care services, most health and medical services etc.
Although a tiny supplier, i.e. a company with annual sales under $30,000 isn’t required to file for GST, occasionally it’s beneficial to do this. Since a small business are only able to claim Input Tax Credits (GST paid on expenses) when they are registered, many businesses, specially in the set up phase where expenses exceed sales, could find that they’re capable to recover a great deal of taxes. This has to be balanced from the potential competitive advantage achieved from not charging the GST, plus the additional administrative costs (hassle) from the need to file returns.
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