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

Navigating the complexities of GST/HST (Goods and Services Tax/Harmonized Sales Tax) can be overwhelming for small business owners. At Tax Return Filers Ltd., we specialize in ensuring accurate and timely filing of GST/HST to help you stay compliant and focus on growing your business. Whether you’re new to business or just starting to learn about GST/HST, this guide will cover all the basics and answer common questions about registration, filing, and compliance.

What is GST/HST?

GST/HST is a value-added tax levied on most goods and services sold in Canada. The GST is set at 5% and applies across Canada, while HST is a combination of GST and the provincial sales tax (PST) and varies by province. The HST rates range from 13% to 15%, depending on the province.

Does My Small Business Need to Collect GST/HST?

The requirement to register for GST/HST depends on your business’s revenue. If your business makes more than $30,000 in taxable sales in any single calendar quarter or over the last four consecutive quarters, you are no longer considered a “small supplier” and must register for GST/HST.

Here’s what you need to know:

• Taxable Supplies: GST/HST is charged, collected, and remitted on sales of taxable goods and services. As a registrant, you can also claim credits, called input tax credits (ITCs), for the GST/HST paid to produce those goods and services.
• Zero-Rated Supplies: GST/HST is not charged, collected, or remitted on zero-rated supplies, such as basic groceries and certain medical devices. However, as a registrant, you can still claim ITCs for GST/HST paid to produce these goods or services.
• Exempt Supplies: GST/HST is not charged, collected, or remitted on exempt supplies, such as most health care services and educational courses. Unlike zero-rated supplies, you cannot claim ITCs for GST/HST paid to produce these goods or services.

 

Do I Have to Pay GST/HST if I Make Less than $30,000?

If your small business earns less than $30,000 in revenue over four consecutive calendar quarters (not the calendar year), you are considered a small supplier and do not have to register for GST/HST. However, the moment your sales exceed $30,000 in a single calendar quarter or over the last four quarters, you must register within 29 days from the day you pass the threshold.

Example:
Let’s say your business made $32,000 in sales between July 1, 2023, and June 30, 2024. Even if your sales did not exceed $30,000 in any single calendar year, you are no longer a small supplier because you have passed the $30,000 threshold over four consecutive calendar quarters. Therefore, you must register for GST/HST.

Should I Register for GST/HST if My Business Revenue is Below $30,000?

Although it’s not mandatory, voluntarily registering for GST/HST before hitting the $30,000 threshold can be beneficial in several ways:

1. Claiming ITCs: If you produce or sell zero-rated supplies, voluntary registration allows you to claim ITCs on GST/HST paid for producing those goods or services.
2. Better Recordkeeping: Registering early gives you a head start on proper recordkeeping and ensures you have everything organized once you’re legally required to collect and remit GST/HST.
3. Reclaiming GST/HST on Upfront Costs: If your business incurs significant startup costs, voluntarily registering for GST/HST allows you to reclaim the GST/HST paid on these costs through ITCs, resulting in a potential refund that could provide extra cash flow.

 

Steps to Collecting and Filing a GST/HST Return

If you’ve determined that you need to register for GST/HST or want to do so voluntarily, follow these steps to get started:

1. Apply for a GST/HST Number

You can register for a GST/HST number by:

• Calling the CRA Business Enquiries line at 1-800-959-5525.
• Filling out and submitting the Form RC1 online or by mail.

Once registered, you will receive a unique GST/HST number that you’ll use to collect and remit GST/HST.

2. Collect the GST/HST on Sales

Once registered, start collecting GST/HST on all taxable supplies. Ensure that your invoices clearly show the GST/HST collected and include your GST/HST number.

Example:
If you sell a product for $100 in Ontario, where HST is 13%, you would charge $113 ($100 + $13 HST). Make sure to include the breakdown of the HST on your invoice to customers.

3. File a GST/HST Return

Based on your reporting period (monthly, quarterly, or annually), you must file a GST/HST return. Most small businesses file annually, but larger businesses or those with high volumes may need to file more frequently.

Your GST/HST return must include:

• Total Sales: The total value of taxable, zero-rated, and exempt sales.
• Total GST/HST Collected: The amount of GST/HST collected from customers.
• ITCs: The total ITCs claimed for GST/HST paid on business expenses.

 

4. Remit the GST/HST

Calculate the amount of GST/HST to remit by subtracting your ITCs from the GST/HST collected. If the result is positive, remit the balance to the CRA by the due date. If it’s negative, you’ll receive a refund.

5. Keep Records for 6 Years

The CRA requires you to keep all records related to your GST/HST filings for at least six years. These records include invoices, receipts, and financial statements. Proper recordkeeping is essential in case of an audit or review by the CRA.

Final Thoughts

Registering for and filing GST/HST doesn’t have to be complicated. By understanding your obligations and keeping accurate records, you can ensure compliance and take advantage of potential tax credits. Whether you’re just starting or looking to expand your business, proper GST/HST management can help you maintain a healthy cash flow and grow your business.

At Tax Return Filers Ltd., we’re here to help you every step of the way. If you have questions about GST/HST registration or need assistance with your returns, please feel free to contact us. Let’s keep your business compliant and thriving!