The products and Services Tax or GST can be a consumption tax that’s charged on many products or services sold within Canada, no matter where your company is located. Susceptible to certain exceptions, all companies are required to charge GST, currently at 5%, plus applicable provincial sales taxes. A company effectively serves as a realtor for Revenue Canada by collecting the taxes and remitting them with a periodic basis. Organizations are also allowed to claim the required taxes paid on expenses incurred that relate to their business activities. They’re known as Input Tax Credits.
Does Your small business Need to Register? Ahead of doing just about any commercial activity in Canada, all business people need to determine how the GST and relevant provincial taxes sign up for them. Essentially, all companies that sell goods and services in Canada, for profit, are needed to charge GST, with the exception of the subsequent circumstances:
Estimated sales for that business for 4 consecutive calendar quarters is predicted to get less than $30,000. Revenue Canada views these companies as small suppliers and they are therefore exempt.
The company activity is GST exempt. Exempt services and goods includes residential land and property, nursery services, most health and medical services etc.
Although a tiny supplier, i.e. a business with annual sales below $30,000 isn’t required to file for GST, occasionally it is best for do so. Since a small business is only able to claim Input Tax Credits (GST paid on expenses) if they are registered, companies, particularly in the set up phase where expenses exceed sales, might find actually in a position to recover a great deal of taxes. This has to be balanced contrary to the potential competitive advantage achieved from not charging the GST, and also the additional administrative costs (hassle) from having to file returns.
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