Understanding GST and HST Payments in Canada 💲

The Goods and Services Tax (GST) and the Harmonized Sales Tax (HST) are two consumption taxes that are levied on the sale of goods and services in Canada.

These taxes are collected by businesses on behalf of the government and must be remitted periodically.

Understanding how these taxes work and how to correctly remit them can be confusing for new business owners.

In this article, we will explore the basics of GST and HST payments in Canada.

1. Difference between GST and HST

The GST is a federal tax that is applied to most goods and services sold in Canada. It is currently set at a rate of 5%.

The HST, on the other hand, is a combined federal and provincial tax that is only applicable in certain provinces.

The rate of the HST varies depending on the province, ranging from 13% in Ontario and Prince Edward Island to 15% in Nova Scotia.

2. When to Register for GST/HST

Businesses that have annual revenues exceeding $30,000 are required to register for GST/HST.

However, even if your revenues are below this threshold, you can still voluntarily register for GST/HST.

It may be beneficial to do so if you anticipate making significant purchases on which you can claim input tax credits.

3. Input Tax Credits

One of the key benefits of registering for GST/HST is the ability to claim input tax credits (ITCs).

ITCs allow businesses to recover the GST/HST they have paid on expenses related to their commercial activities.

This helps reduce the overall tax burden on the business.

4. Filing and Remitting GST/HST

Businesses must file a GST/HST return either annually, quarterly, or monthly, depending on their annual revenues.

The return must be filed by the due date and any taxes owed must be remitted to the Canada Revenue Agency (CRA).

Failure to file and remit on time can result in penalties and interest charges.

5. Quick Method of Accounting

The Quick Method of accounting for GST/HST is an optional method that simplifies the calculation of GST/HST owed.

Under this method, businesses charge GST/HST at a reduced rate on their sales but remit a higher rate to the CRA.

The difference between the two rates is kept by the business as a tax credit.

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In conclusion, understanding GST and HST payments in Canada is essential for all businesses that are required to collect and remit these taxes.

By familiarizing yourself with the basics of these taxes, you can ensure that you comply with all regulations and avoid any costly penalties.

If you have any questions or need further assistance, it is recommended to consult with a tax professional who can provide guidance tailored to your specific situation.

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