GST Considerations For New Business Owners

The Goods and Services Tax or GST is a consumption tax which isn’t charged on most goods and services sold within Canada, regardless of where your business is located. Subject to certain exceptions, all companies are required to charge GST, currently at 5%, plus applicable provincial sales tax return. A business effectively acts as an agent for Revenue Canada by collecting the required taxes and remitting them on a periodic basis. Businesses additionally permitted to claim the taxes paid on expenses incurred that relate back to their business activities. These people are referred to as Input Tax Credits.

Does Your Business Need to Ledger?

Prior to going into any kind of economic activity in Canada, all business owners need to determine how the GST and relevant provincial taxes apply to that company. Essentially, all businesses that sell goods and services in Canada, for profit, have to charge GST, except in the following circumstances:

Estimated sales for your business for 4 consecutive calendar quarters is expected to get less than $30,000. Revenue Canada views these businesses as small suppliers and are also therefore exempt.

The business activity is GST exempt. Exempt goods and services includes residential land and property, child care services, most health and medical services etc.

Although a small supplier, i.e. an individual with annual sales less than $30,000 is not required to file for GST Registration Portal Login, in some cases it is good do so. Since a business is able to claim Input Tax credits (GST paid on expenses) if tend to be registered, many businesses, particularly in the start up phase where expenses exceed sales, may find that they will be able to recover a significant involving taxes. This is balanced against the opportunity competitive advantage achieved from not charging the GST, provided additional administrative costs (hassle) from to be able to file returns.

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