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Posted by Tax Consultants

General Information about GST/HST

What is the GST/HST Number?
GST/HST is a tax that applies on most supplies of goods and services made in Canada. The GST rate is 5% across Canada and the HST rate varies from province to province.

As of July 01, 2010, much of Canada has now harmonized their provincial sales tax with GST to create the harmonized sales tax (HST). This rate is 13% in Newfoundland, New Brunswick and Ontario, 12% in British Columbia (back to GST at 5% & 7% PST) and 15% in Nova Scotia.

GST/HST registrants who make taxable supplies (other than zero-rated supplies) in one of these participating provinces collect tax at the provincial GST/HST rate. Registrants collect tax at the 5% GST rate on taxable supplies made in the rest of Canada (other than zero-rated supplies).

Who pays GST/HST?
Almost everyone has to pay GST/HST on purchases of taxable supplies of goods and services (other than zero-rated supplies). However, the Indigenous and some groups and organizations, such as many provincial and territorial governments, do not always pay GST/HST on their purchases.

Who charges GST/HST?
Generally, GST/HST registrants have to collect GST/HST on all taxable (other than zero-rated) supplies of goods and services they provide to their customers. However, there are some exceptions for sales of taxable real property.

What is the Federal Business Number (BN)?
The BN is issued by the Canada Revenue Agency (CRA) and is used to unify all accounts a business may have with the federal government. The BN is used to operate corporate income tax, import/export accounts, payroll deductions and GST/HST.

When should I apply for the Federal Business Number (BN)?
Registration should take place after the company has been registered. We can assist you with both, the business registration and the GST/HST registration at the same time.

General Information about GST/HST
Most goods and services sold or provided in Canada are taxable at the rate of 5% (GST) or 12% to 15% (HST). Certain items, such as sales of basic groceries and prescription drugs are taxable at a rate of 0%. These are referred to as zero-rated goods and services. A limited number of goods and services are exempt from the GST/HST.

The GST/HST applies to most transactions from manufacturing to marketing and sales. Businesses and organizations registered for the GST/HST are referred to as registrants.

A Business must register to obtain a Business Number with a GST/HST account. Registrants can claim a credit to recover the GST/HST that is paid or payable on purchases used to provide taxable goods and services. This credit is called an input tax credit and can be claimed for the GST/HST paid or payable for goods or services acquired or imported for use, consumption or supply in their commercial (taxable) activities.

GST/HST registrants who provide taxable goods or services have to charge and collect the GST/HST on their sales. If the GST/HST collected is greater than the GST/HST paid or payable, the difference is sent to the CRA. If the GST/HST collected is less than the GST/HST paid or payable, a refund can be claimed.

Do I need to register for GST (Goods and Services Tax)?
While you are not required to register for GST/HST until your annual gross revenues exceed a minimum threshold (currently $30,000) we generally recommend that any business register as soon as possible.

Three reasons to register:
1. Unless you are a GST/HST registrant you cannot claim GST/HST input tax credits (GST/HST paid on business expenditures). If you are a GST/HST registrant and your input tax credits exceed GST/HST collected on sales, you may claim a refund of the excess from Canada Revenue Agency. If you’re not a registrant the GST/HST paid on expenses is included as part of the expense when computing net income.

2. Not being registered for GST/HST tells everyone that you are running a truly small business. (Your sales are below $30,000 per year) If your customers are other businesses, they expect to pay GST/HST.

3. Companies that are required to register for GST/HST must remit the GST/HST tax to Canada Revenue Agency – even if it has not been collected from the customer. By registering for GST/HST upon starting your business you will eliminate the possibility of inadvertently surpassing the $30,000 threshold and being exposed to penalties and interest charges for noncompliance.

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