Goods and Services Tax or GST can be a consumption tax that is certainly charged of all services and goods sold within Canada, no matter where your business is located. Susceptible to certain exceptions, all businesses must charge GST, currently at 5%, plus applicable provincial sales taxes. An enterprise effectively acts as a representative for Revenue Canada by collecting the required taxes and remitting them on a periodic basis. Companies are also allowed to claim the required taxes paid on expenses incurred that relate with their business activities. They are called Input Tax Credits.

Does Your Business Need to Register? Prior to doing any type of commercial activity in Canada, all businesses need to decide how the GST and relevant provincial taxes sign up for them. Essentially, all businesses that sell products and services in Canada, for profit, are needed to charge GST, with the exception of the next circumstances:

Estimated sales for that business for 4 consecutive calendar quarters is anticipated to become less than $30,000. Revenue Canada views these lenders as small suppliers and they’re therefore exempt.

The business activity is GST exempt. Exempt products and services includes residential land and property, child care services, most medical and health services etc.
Although a smaller supplier, i.e. a business with annual sales lower than $30,000 is not required to file for GST, sometimes it is good to do this. Since an enterprise is only able to claim Input Tax Credits (GST paid on expenses) should they be registered, many companies, particularly in the start up phase where expenses exceed sales, might discover actually capable to recover a significant amount of taxes. This has to be balanced contrary to the potential competitive advantage achieved from not charging the GST, along with the additional administrative costs (hassle) from being forced to file returns.

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