Essential GST/HST Facts: Top 3 Tips
Who has to register for GST/HST, what registrants must file, and what it costs when you get it wrong.
GST/HST: an overview
GST (Goods and Services Tax) and HST (Harmonized Sales Tax) are charged on the supply of goods and services made in Canada, and on the importation of goods into Canada. Equivalent taxes are charged in many other parts of the world under different names, such as VAT (Value Added Tax), sales tax or service tax.
How does it affect your business?
Almost all businesses are affected by GST/HST, as they deal in either goods or services. If you supply goods or services in your own country, most of them are subject to GST/HST. If you import goods, those may also be subject to it. If you export goods or services, they are mostly not chargeable, and are treated 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 an Input Tax Credit (ITC) if you used those goods or services in making your own supplies. In other words, GST/HST paid on purchases is available as a credit against the GST/HST you charge on your sales.
Based on your turnover or tax liability, you remit GST/HST monthly, quarterly or annually to the Canada Revenue Agency (CRA), and report it at the same frequency by filing GST/HST returns.
Is it for you?
GST is a self-assessed tax, and every business entity is required to continually assess whether it needs to be registered. Registration falls into two categories: compulsory and voluntary.
Compulsory registration
You have to register if you meet both of these conditions:
- You provide taxable (including zero-rated) property and services in Canada in the course of your commercial activity
- You no longer qualify as a small supplier
If you operate a taxi or limousine service, you need to register on the day you begin to operate that service, even if you are a small supplier.
Voluntary registration
You can register for a GST/HST account by making an application to the CRA, even if you do not meet the conditions for compulsory registration.
Compliance required
The following are the main responsibilities of a GST/HST registrant:
- File returns on a regular basis
- The GST/HST return is filed on Form GST34-2
- The return must be filed electronically (Form GST34-3) if the registrant falls into a specified category
- Several methods are available for electronic filing, depending on the registrant’s situation
- Collect tax on taxable supplies
- Remit the resulting net tax owing, if any, including instalment payments
Consequences of failure
Interest
Interest equal to the basic rate plus 4% is 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
| Type of penalty | When it applies | Amount charged |
|---|---|---|
| Failure to file return | Any return filed late, unless there is a $0 amount owing or you are owed 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 | $100 for the first return not filed electronically; $250 for each subsequent one |
| Failure to accurately report information | For electronically filed returns: information omitted, amounts over- or under-reported, or amounts reported incorrectly | Generally 5% of the amount, plus 1% per month of the difference between what was reported and what should have been reported, until corrected, to a maximum of 10% |
GST/HST deadlines
| 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 | Period ends 31 July; file and pay by 31 August |
| Quarterly | One month after the end of the reporting period | One month after the end of the reporting period | Period ends 31 March; file and pay by 30 April |
| Annually (except individuals with a 31 December year-end and business income) | Three months after fiscal year-end | Three months after fiscal year-end | Period ends 31 August; file and pay by 30 November |
| Annually (individuals with a 31 December year-end and business income) | 15 June | 30 April | Period ends 31 December; file by 15 June, pay by 30 April |
If you would like help with GST/HST registration, filing or review, contact us at cs@bkcprohub.com.