The products and Services Tax or GST can be a consumption tax that’s charged of all products and services sold within Canada, wherever your business is located. At the mercy of certain exceptions, all businesses are needed to charge GST, currently at 5%, plus applicable provincial sales taxes. A small business effectively serves as an agent for Revenue Canada by collecting the taxes and remitting them on the periodic basis. Businesses are also allowed to claim the required taxes paid on expenses incurred that report for their business activities. These are generally known as Input Tax Credits.
Does Your Business Should Register? Prior to participating in just about any commercial activity in Canada, all companies have to determine how the GST and relevant provincial taxes affect them. Essentially, every business that sell goods and services in Canada, for profit, have to charge GST, except in the subsequent circumstances:
Estimated sales for that business for 4 consecutive calendar quarters is required being under $30,000. Revenue Canada views these firms as small suppliers and they are therefore exempt.
The business enterprise activity is GST exempt. Exempt goods and services includes residential land and property, day care services, most medical and health services etc.
Although a small supplier, i.e. a small business with annual sales less than $30,000 is not required to submit GST, occasionally it’s best for accomplish that. Since a small business could only claim Input Tax Credits (GST paid on expenses) if they’re registered, many businesses, particularly in the start-up phase where expenses exceed sales, might discover that they are in a position to recover a great deal of taxes. This has to be balanced from the potential competitive advantage achieved from not charging the GST, along with the additional administrative costs (hassle) from the need to file returns.
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