A Beginner’s Guide to GST/HST Filing for Your Business

GST/HST filing is how your business reports and pays the taxes it collects on things you sell in Canada. The Goods and Services Tax (GST) is a 5% tax used across the country. The Harmonized Sales Tax (HST) combines the GST with local provincial taxes, making it 13% to 15% depending on where you live. Dealing with these taxes can feel scary for new business owners, but learning the basics of signing up, getting tax credits, and following the rules is very important. 

In this guide, we will explain exactly when you need to register, what items are taxed, and the step-by-step process to file your returns. If you want to take the guesswork out of this, Tax Return Filers Ltd. can make sure your GST/HST filing is done right and on time, so you can easily focus on growing your business.

Understanding the Types of Sales

Before you register, you need to know how the Canada Revenue Agency (CRA) groups the items or services you sell. Here is what you need to know:

Taxable Sales

You must charge and collect GST/HST on most goods and services you sell. Once you are registered, you can also get money back for the GST/HST you paid on your own business expenses. These refunds are called Input Tax Credits (ITCs).

Zero-Rated Sales

You do not charge GST/HST on certain everyday items, like basic groceries and some medical tools. However, if you are registered, you can still claim ITCs to get back the tax you paid on the supplies used to make or sell these items.

Exempt Sales

You also do not charge GST/HST on exempt sales, like most healthcare services and educational classes. But, unlike zero-rated sales, you cannot claim ITCs for the taxes you paid to provide these services.

When Does Your Small Business Need to Register?

Whether you need to sign up for GST/HST depends on how much money your business makes and the CRA’s “Small Supplier” rule.

The $30,000 Limit

If your business makes more than $30,000 in taxable sales in a single three-month quarter, or over four quarters in a row, you are no longer a “small supplier.” Once you pass this limit, you must register for a GST/HST account within 29 days.

The Small Supplier Exemption

If your business earns less than $30,000 over four quarters in a row, you are still a small supplier. This means you do not have to register for GST/HST yet.

Example:
Let’s say your business made $32,000 between July 1, 2023, and June 30, 2024. Even if you didn’t make $30,000 in a single calendar year (January to December), you still crossed the $30,000 limit over four quarters in a row. Because of this, you must register for GST/HST.

Benefits of Signing Up Early

Even if you don’t have to, signing up for GST/HST before you hit the $30,000 limit can help you in a few ways:

• Get Tax Credits: If you sell zero-rated items, signing up early lets you get back the tax you paid on your business expenses.
• Get Money Back on Startup Costs: If you spent a lot of money to start your business, registering early lets you claim tax credits on those costs. This could give you a nice refund and put more cash in your pocket.
• Better Recordkeeping: Registering early helps you get organized. You will already have a good system in place by the time you are legally required to collect the tax.

5 Steps to Collect and File Your GST/HST

If you need to register, or if you choose to do it early, just follow these five simple steps:

Step 1: Get a GST/HST Number

You can get a GST/HST number by calling the CRA at 1-800-959-5525. You can also fill out Form RC1 online or mail it in. Once you are signed up, you will get a special number to use when you collect and pay the tax.

Step 2: Collect the Tax on Your Sales

After you register, start collecting GST/HST on the taxable items you sell. Make sure your receipts or invoices clearly show the tax amount and your new GST/HST number.

Example: If you sell a product for $100 in Ontario (where HST is 13%), you would charge the customer $113 ($100 + $13 HST). Make sure the $13 tax is clearly listed on the bill.

Step 3: File Your GST/HST Return

The CRA will tell you how often to file your taxes (monthly, every three months, or once a year). Most small businesses do this once a year. On your tax return, you must show your total sales, the total tax you collected, and the tax credits (ITCs) you are claiming for your business expenses.

Step 4: Pay the Tax You Owe

To find out how much you owe, take the total tax you collected and subtract your tax credits (ITCs). If the final number is greater than zero, you pay that amount to the CRA. If the number is below zero, the CRA owes you a refund!

Step 5: Keep Your Records for 6 Years

The CRA asks you to save all your tax records for at least six years. This includes your invoices, receipts, and bank statements. Keeping good records is very important just in case the CRA ever wants to check your math.

Final Thoughts

Registering for and filing your GST/HST does not have to be hard. By learning the rules and keeping good records, you can easily follow the law and even get some helpful tax credits. Whether you are just starting out or growing your business, managing your taxes the right way keeps your cash flow healthy.

At Tax Return Filers Ltd., we are here to help you every step of the way. If you have any questions or need help filing your returns, please reach out to us. Let’s keep your business on track and thriving!