Tell a Friend
Demystifying the GST
Published October 2000
We created this primer to help you understand ins and outs of the GST. Note: effective July 1, 2006 the GST rate was reduced to 6%. Invoices for work after this date must use the new GST rate.
When to Collect
Essentially if you operate a sole proprietorship, a partnership, or a corporation that has gross sales over $30,000 in a fiscal year you are required to collect GST on behalf of the federal government. If your sales are less than $30,000 you can still charge and collect GST.
-
Things to note:
- When determining whether or not you need to register for the GST/HST, you need to look at your income in consecutive quarters.
- If your income exceeds the $30,000 threshold for any four consecutive quarters, or in any quarter, you must register.
- Sole proprietors operating more than one business must combine the income from all businesses when determining if they need to register for the GST/HST.
For example, if one business had total revenues (before expenses) of $20,000 and a second business had total revenues (before expenses) of $12,000 in four consecutive quarters, you would need to register for and charge the GST.
- If you are a public service body, such as a charity, you do not have to register for the GST until your total revenues exceed $50,000.
Time to Register
What if you reach the threshold and you aren't collecting GST? You have 29 days from the time that your revenues reached $30,000 to register with Canada Customs and Revenue Agency (CCRA) so that you can charge GST.
If you achieve the $30,000 threshold in 13 months, or in four continuous quarters plus one month then you are required to register. For example, if you make $28,000 from October 2003 to September 2004, and make the remaining $2,000 in October 2004 you are now required to collect GST. You then have 29 days from the date that your business earned $30,000 to register.
When you register you will have a registration effective date. This date establishes:
- when you become eligible for any credits
- when you are liable to collect GST/HST.
Often businesses that are not required to register for the GST do so anyway.
On the positive side, registering early means you can claim back the GST you paid for start-up purchases. For some businesses charging the GST adds credibility, as customers won't know that the company is earning less than $30,000 a year.
On the down side, being registered means that you have extra paperwork to do. And of course, you also have to charge and remit the tax.
Provincial breakdown
| Province | GST | PST | HST |
| British Columbia |
X
|
X
|
|
| Alberta |
X
|
|
|
| Saskatchewan |
X
|
X
|
|
| Manitoba |
X
|
X
|
|
| Ontario |
X
|
X
|
|
| Quebec* |
X
|
X
|
|
| Newfoundland |
|
|
X
|
| New Brunswick |
|
|
X
|
| Nova Scotia |
|
|
X
|
| PEI* |
X
|
X
|
|
| Yukon |
X
|
|
|
| NWT |
X
|
|
|
| Nunavut |
X
|
|
|
In British Columbia, businesses can choose to collect the provincial sales tax and GST separately, or they can elect to charge the harmonized sales tax (HST). The effective tax rate is the same in either case.
*In Prince Edward Island and Quebec the PST is charged on the final sale price plus the GST. In other provinces that levy a provincial sales tax, both the GST and PST are charged on the final sale price.
Here are two examples that illustrate how this works.
| ON Sale (PST Rate: 7%) | ||
| Final price: | $10.00 | |
| GST: | $0.60 | ($10 x 0.06): |
| PST: | $0.80 | ($10 x 0.08): |
| Total price: | $11.40 | |
| PEI Sale (PST Rate: 10%) | ||
| Final price: | $10.00 | |
| GST: | $0.60 | ($10 x 0.06): |
| Sub-total: | $10.60 | |
| PST: | $1.06 | ($10.60 x 0.10): |
| Total price: | $11.66 | |
Registering
Whether your decision to collect GST is voluntary or mandatory, you must register with the CCRA. You have several options for registration, visit the nearest CCRA office, by phone, or online.
Once you are registered you will receive a Business Number (BN). This number will then be used to identify your business every time you deal with CCRA, including submitting your GST/HST returns. You will also be given a reporting schedule for how often the GST you collect must be submitted.
Submitting GST
Your total revenues will determine how often you will have to report your GST returns. The smaller your profits the less frequently you need to file. However, you do have the option of filing more often if you prefer. This chart illustrates your requirements:
| Revenue Threshold | Required Reporting Time | Optional Reporting Time |
| $0 - $500,000 | Annually | Monthly or Quarterly |
| $500,001 - $6,000,000 | Quarterly | Monthly |
| Over $6,000,000 | Monthly | Not Applicable |
Tip: if your annual sales are less than $500,000, ask for the quarterly filing option when you register to cut down on paperwork.
Most Visited Articles |
Related Articles |
If you enjoyed this article, be sure to visit CanadaOne's current issue for more informative articles.
