GST Considerations For New Business Owners

The Goods and Services Tax or GST is a consumption tax which isn’t charged on most goods and services sold within Canada, regardless of where your business is situated. Subject to certain exceptions, all businesses are required to charge GST, currently at 5%, plus applicable provincial sales taxes. A business effectively acts as an agent for Revenue Canada by collecting the taxes and remitting them on a periodic basis. Businesses furthermore permitted to claim the taxes paid on expenses incurred that relate of their business activities. These are referred to as Input Tax Breaks.

Does Your Business Need to Ledger?

Prior to going into any kind of commercial activity in Canada, all business owners need to figure out how the GST and relevant provincial taxes apply to that company. Essentially, all businesses that sell goods and services in Canada, for profit, are required to charge GST, except in the following circumstances:

Estimated sales for your business for 4 consecutive calendar quarters is expected to get less than $30,000. Revenue Canada views these businesses as small suppliers and are also therefore exempt.

The business activity is GST exempt. Exempt Goods and Services Tax Registration in India Online and services includes residential land and property, child care services, most health and medical services many others.

Although a small supplier, i.e. a business with annual sales less than $30,000 is not required to file for GST, in some cases it is good do so. Since a business can only claim Input Breaks (GST paid on expenses) if tend to be registered, many businesses, particularly in the start up phase where expenses exceed sales, may find oftentimes able to recover a significant amount of taxes. This has to be balanced against prospective competitive advantage achieved from not charging the GST, this substance additional administrative costs (hassle) from in order to file returns.