GST / HST / PST

Goods and Services Tax (GST) and Harmonized Sales Tax (HST) are essential components of Canada’s tax system. If you’re a business owner, freelancer, or self-employed professional, you may be required to collect and remit GST/HST on your sales. However, navigating the filing process can be confusing, especially if you’re new to it.

This guide breaks down everything you need to know about filing GST/HST in Canada, from registration to payment, deadlines, and common mistakes to avoid.

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Who Needs to Register for GST/HST?

Not every business is required to register for GST/HST. Here’s how you can determine if you need to register:

Mandatory Registration:

You must register for GST/HST if:

• Your total taxable revenue exceeds $30,000 in a single calendar quarter or over four consecutive quarters.
• You provide taxable goods or services in Canada, including online sales.
• You operate as a sole proprietor, partnership, corporation, or nonprofit that sells taxable goods or services.

Voluntary Registration:

Even if your revenue is below $30,000, you may still choose to register voluntarily. Some benefits of voluntary registration include:

• The ability to claim Input Tax Credits (ITCs), which allow you to recover GST/HST paid on business expenses.
• Gaining credibility as a registered business.
• Avoiding registration delays when your business grows past the $30,000 threshold.

Exceptions:

Certain businesses, such as those providing exempt goods and services (e.g., healthcare, childcare, financial services), are not required to register.

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How to Register for a GST/HST Account

If you determine that you need (or want) to register for GST/HST, follow these simple steps:

Step 1: Gather Required Information

Before you register, make sure you have:

• Your business name and structure (sole proprietor, partnership, or corporation).
• Your Social Insurance Number (SIN) or Business Number (BN).
• A description of your business activities.
• The estimated revenue and sales figures.

Step 2: Choose Your Registration Method

You can register for GST/HST through one of the following methods:

1. Online: Register through the Canada Revenue Agency (CRA) Business Registration Online (BRO) portal.
2. By Phone: Call the CRA at 1-800-959-5525.
3. By Mail or Fax: Complete Form RC1 – Request for a Business Number and submit it to the CRA.

Step 3: Receive Your GST/HST Number

Once your registration is approved, you will receive a GST/HST account number, which will be used for filing and remitting taxes.

 

Methods for Calculating Your Net Tax

After collecting GST/HST from customers, you need to calculate how much tax you owe to the CRA. There are two main methods:

1. Regular (Detailed) Method

This method requires businesses to:

• Total the GST/HST collected from customers.
• Subtract Input Tax Credits (ITCs) for GST/HST paid on business expenses.

Example:

If you collected $5,000 in GST/HST from sales and paid $1,500 in GST/HST on expenses, your net tax to remit would be:
$5,000 – $1,500 = $3,500.

2. Quick Method

The Quick Method simplifies tax calculations for businesses with annual taxable sales under $400,000. Instead of tracking ITCs, businesses remit a reduced percentage of the GST/HST collected.

This method works well for service-based businesses with few expenses but may not be ideal for those with high business costs.

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Step-by-Step Guide to Completing the GST/HST Return Form

Filing your GST/HST return involves reporting collected taxes and ITCs. Here’s how to complete the process:

Step 1: Choose Your Filing Period

Your GST/HST return is based on your filing frequency, which could be:

• Annually (for businesses earning $1.5M or less)
• Quarterly (for businesses earning between $1.5M and $6M)
• Monthly (for businesses earning over $6M)

Step 2: Complete Your Return Form

Use Form GST34-2 (GST/HST Return for Registrants), which includes:

• Line 101: Total sales and revenue.
• Line 103: Total GST/HST collected.
• Line 104: Adjustments (if any).
• Line 105: Total Input Tax Credits (ITCs).
• Line 109: Net tax payable or refund.

Step 3: File Your Return

You can file your return online, by mail, or through a financial institution.

 

Filing Deadlines and Reporting Periods

To avoid penalties, you must file your GST/HST return by the due date.

Deadlines by Filing Frequency:

• Monthly/Quarterly Filers: One month after the end of the period.
• Annual Filers (Individual Proprietors): April 30th.
• Annual Filers (Corporations): Three months after fiscal year-end.

Missing deadlines can result in penalties and interest on outstanding balances.

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How to Remit (Pay) the GST/HST You Owe

If you owe GST/HST, there are several payment options:

1. Online through CRA’s My Payment portal.
2. Through your financial institution (online banking or in-person).
3. By mail (using a remittance voucher with a cheque).
4. By pre-authorized debit (setting up automatic withdrawals).

If your net tax is negative (meaning you’ve paid more in ITCs than collected GST/HST), the CRA will issue a refund.

Options for Filing Your GST/HST Return

There are multiple ways to submit your return:

• Online via CRA’s My Business Account (recommended for speed and convenience).
• Through a tax professional or accountant.
• By mail using a paper return.
• In-person at a financial institution (if you have a remittance voucher).

Most businesses opt for online filing as it provides instant confirmation and faster processing.

Common Mistakes to Avoid When Filing

Avoid these common errors to prevent penalties and delays:

1. Missing the Filing Deadline

Late filing results in penalties and interest. Mark your calendar or set reminders to avoid this mistake.

2. Incorrect Tax Calculations

Ensure you use the correct GST/HST rate based on your province. Double-check your calculations to avoid discrepancies.

3. Failing to Claim Input Tax Credits (ITCs)

Many businesses forget to claim ITCs, missing out on potential tax refunds. Keep detailed records of all business expenses.

4. Using the Wrong Filing Frequency

Your business revenue determines your filing period. If unsure, check with the CRA.

5. Not Keeping Proper Records

Maintain organized financial records for at least six years in case of a CRA audit.

 

Final Thoughts

Filing GST/HST in Canada may seem complicated at first, but with the right knowledge and preparation, it becomes a straightforward process. Whether you’re a new business owner or filing for the first time, following these steps will ensure compliance, avoid penalties, and possibly even lead to tax refunds through ITCs.

If you’re unsure about any step, consider consulting a tax professional to ensure accuracy and efficiency in your GST/HST filings. Happy filing!