12 Dec Business Essentials – A Closer Look at GST
My main focus here at Clearline is working with business owners. And whether that means you have an incorporated company or you are a sole-proprietor, whether you have $100,000 of revenue or $10,000,000 of revenue, navigating the world of accounting, taxes and the Canada Revenue Agency is complicated.
Over the years, we have developed a New Business Guide to outline some of the foundational concepts of operating a business in Canada. Over my next few blogs, I am going to highlight some of the important items for new business owners to consider. Even if you’re a seasoned vet, this should be a good refresher.
Goods and Services Tax (GST) returns and filings
No better place to start than the often overlooked and forgotten area of GST. Your business is required to register for a GST account, and collect GST on sales, if your total revenues from taxable supplies are over $30,000 in a single calendar quarter or over four consecutive calendar quarters.
The rate of GST in BC is 5% and this tax applies to the supply of most property and services. If your business is registered for GST, it must charge and collect GST on all taxable goods and services. For a full list of GST exempt goods and services, click here.
In addition to charging GST on your sales, you are also eligible to claim back GST you have paid on purchases. These are referred to as Input Tax Credits (ITCs). When it is time to file your GST return, these ITCs are deducted against the GST you have collected. When the business is first starting out, expenses can often be higher than revenue. It is not uncommon to see GST refunds from CRA.
The regularity with which your business is required to file GST returns is determined by its annual sales. In the table below, we provide you with a guideline for assigned and optional reporting periods for GST filings:
|Annual taxable supplies
|Assigned reporting periods||Optional reporting periods|
|$1,500,000 or less||Annual||Monthly, Quarterly|
|More than $1,500,000 up to $6,000,000||Quarterly||Monthly|
|More than $6,000,000||Monthly||None|
As is shown above, unless your business’ annual sales exceed $1,500,000 you are only required to file GST returns once per year.
While you may only be required to file your GST annually, CRA may want you to remit instalments during the year. If your business’ net GST owing is more than $3,000 for a fiscal year, you will be asked to make quarterly instalment payments throughout the following fiscal year. Instalments are not required; however, if you do not make them and it turns out your should have, CRA will be more than happy to assess interest. Currently, CRA charges interest on instalment arrears at 5%. These quarterly instalment payments are due within one month after the end of each of your fiscal quarters and are usually equal to a quarter of your net tax from the previous year.
GST is a technical and complicated area. CRA is increasingly quick to assess interest and penalties on overdue filings, late payments or incorrectly assessed amounts. Unfortunately CRA is yet to forgive based on ignorance. If you have any questions or concerns about GST and your business please contact us.
For more essential information about operating a business in Canada, download our New Business Guide.