GST / HST, An Overview
GST (Goods and Service Tax) or HST (Harmonized Sales Tax) is a tax charged on the supply of goods and services made in US or Canada and on the importation of goods thereto. It is also charged in various other parts of the Globe with the same or other names like VAT (Value Added Tax), Sales Tax or Service Tax.
How it affect your business?
Almost all businesses are affected by GST or HST as they either deal in goods or services. If you supply goods or services in your own country, most of such goods and services are subject to GST / HST. Similarly, if you import goods in your country, it may also be subject to GST / HST. However, if you export goods or services, it is mostly not chargeable to GST / HST and is considered as Exempt or Zero rated depending on where you do business.
Similarly, when you purchase goods or services, you pay GST / HST, which is available as Input Tax Credit (ITC) if you used such goods or services in supplying your goods or services. To put it otherwise, GST / HST paid on goods or services purchased is available as credit while paying GST / HST while you supply goods or services.
Based on your turnover or tax liability, you need to remit your GST / HST on monthly, quarterly or annually to the Government account, i.e. Canada Revenue Agency (CRA) in Canada. Additionally, you need to report GST / HST with the same frequency to the Government by way of filing GST / HST returns.
IS IT FOR YOU?
GST is self assessed tax and every business entity is required to continually assess the need to be registered for GST. GST registration falls into two categories: compulsory registration and voluntary registration.
COMPULSORY REGISTRATION:
You have to register mandatorily, if you meet both these conditions:
If you operate a taxi or providing a limousine service, to need to get registered on the day you begin to operate that service, even if you are small supplier.
VOLUNTARY REGISTRATION:
You can get yourselves registered for GST/HST account, by making application to CRA, even if you do not satisfy the conditions of compulsory registration.
COMPLAINCES REQUIRED
The following are certain responsibilities of GST/HST registrants:
- File returns on a regular basis:
- The GST/HST return is to be filed in Form GST34-2
- GST/HST return is required to be filed electronically (Form GST34-3) if the registrant fall in specified category
- There are different methods available for electronic filing, based on situations in which registrant falls
- Collect tax on taxable supplies
- Remit resulting net tax owing, if any (including installment payments)
CONSEQUENCES OF FAILURE
INTEREST:
Interest equal to the basic rate plus 4% will be charged on an overdue amount. The basic rate is based on the rate charged on 90 day Treasury bills, adjusted quarterly, and rounded up to the nearest whole percentage.
PENALTIES:
The following are the different penalties for different failures:
| Type of penalty |
When it applies |
Amount charged |
| Failure to file return |
Any return you file late unless:
- there is a $0 amount owing; or
- we owe you a refund.
|
A + (B × C)
where
A is 1% of the amount owing;
B is 25% of A; and
C is the number of months the return is overdue, to a maximum of 12 months. |
| Demand to file |
If you receive a demand to file and do not do so. |
$250 |
| Failure to file electronically |
If you are required to file electronically and do not do so. See Mandatory electronic filing of the GST/HST return (GST34-3). |
$100 for the initial return not filed electronically;
$250 for each following return not filed electronically. |
| Failure to accurately report information |
For electronically filed returns:
- information that must be included, but was not;
- amounts that are over or under reported; or
- amounts that are reported incorrectly.
|
Generally 5% of the amount plus 1% per month of the difference between what is reported and what should have been reported, until the amounts are corrected (to a maximum of 10%). |
| Failure to register or late registration |
If you are required to get registered and you do not get registered, or register yourself late |
|
GST/HST DEADLINES:
| GST/HST filing period |
Filing deadline |
Payment deadline |
Example |
| Monthly |
One month after the end of the reporting period |
One month after the end of the reporting period |
Reporting period: July 31
Filing deadline: August 31
Payment deadline: August 31 |
| Quarterly |
One month after the end of the reporting period |
One month after the end of the reporting period |
Reporting period: March 31
Filing deadline: April 30
Payment deadline: April 30 |
| Annually
(except for individuals with a December 31 fiscal year-end
and business income for income tax purposes) |
Three months
after fiscal year-end |
Three months
after fiscal year-end |
Reporting period: August 31
Filing deadline: November 30
Payment deadline: November 30 |
| Annually
(individuals with a December 31 fiscal year-end and business income for income tax purposes) |
June 15 |
April 30 |
Reporting period: December 31
Filing deadline: June 15
Payment deadline: April 30 |
