As a self-employed Candian if you own a startup, you must know the eligibility for tax registration and its implications in a business. Even, you have to file for the tax return that needs you to register yourself to charge the sales taxes. In this content, you will get to see what is GST/HST and how it is applied.

What is Goods and Services Tax or GST?

The Good and Services Tax or GST is 5% tax applied to the taxable items and services across Canada. The exception may occur when you will be collecting GST together with the provincial sales taxes (PST). In such a case, the PST and GST are replaced by Harmonized Sales Tax or HST.

When Do You Need to Collect GST/HST?

GST/HST is not applicable for all goods and services.2 factors in your business determine tax implications- the type of business you’re running and amount of revenue your business generate.

How to Track GST/HST?

As soon as you determine that you need to register for GST, ask your tax accountant in Mississauga to register your business with the Canada Revenue Agency. And, as soon as start collecting the GST/HST, it becomes essential to do proper record keeping. At times, registrants with poor record-keeping forget to separate those funds.

Categories of HST/GST: The chargeable tax on goods and services come into 3 categories-

  • Taxable: The tax is charged collected and remitted. Being a registered business, you can claim credits for GST/HST.
  • Zero-rated: No GST/HST will be applied, collected or remitted. However, having a registered business, you can claim the input tax credit for the paid GST or HST to produce the good and services. For example, your business is selling Apple in the market, there will be no collection of GST, as the fresh fruits and vegetables are zero-rated.
  • Exempt: Even if the GST/HST is not applied and collected from your registered business, you can’t claim the input tax credit for any HST paid. Such services include private tutoring, childcare etc.

Voluntary Registration for GST

The voluntary registration for GST really makes sense in some cases. Even if it is not required, it can help you to give a head-start for proper record keeping. When it comes to filling out your GST return, you have to choose certain accounting method-

  • Standard method is where you have to pay the difference between how much GST you have collected and Input Tax Credit or ITC you have earned.
  • Quick method allows you to calculate GST or HST by multiplying the tax you have collected on sales using remittance rate.
  • The simplified method uses a single formula to file GST return and claim ITC. Just add up all the eligible business expenses and multiply it by a fixed amount you pay for tax and then add any additional amount according to your situation. This method reduces the compliance effort that businesses have to give to separate the record for HST or GST.

It is advised to work with an accounting service provider in Mississauga, who would understand the situation best for you. Professionals can help to choose the right accounting method for chargeable GST.

Author's Bio: 

The author is a tax and accounting service provider in Mississauga and passionately writes blogs and articles with updated knowledge of business laws and enforcement to save people from tax penalties.