When it comes to goods and services tax (GST) basics, one of the most common questions new business owners want to know is whether they need to charge GST. As with most tax questions, the answer depends on a number of things.
It’s important to note that GST is collected on behalf of the government via the Canada Revenue Agency (CRA). The GST you collect is not yours to keep. As consolation, the CRA allows you to claim the GST you pay in the course of business activities as a form of payment to you for collecting the GST on their behalf.
Below we address when to collect GST, how to register, and how to pay any amounts owing to the Canada Revenue Agency.
When to Collect the GST
Registration to collect GST can be voluntary or mandatory. It becomes mandatory once you have taxable sales of over $30,000 annually. In this case, you must register by the end of the month following the month you hit $30,000 in gross sales.
You also have the opportunity to voluntarily register your business as soon as you like. There are advantages and disadvantages to doing so. Whether you choose to register voluntarily will depend on your individual business situation. This is a great opportunity to have a discussion with your accountant or find an accountant if you don’t already have one.
How to Register
The easiest way to register to collect the GST is to do this at the time you register for your business number. However, this is most likely going to apply if you are voluntarily registering to collect the GST. If this is not the case, and you already have a business number, you can log into your CRA My Business Account and register there. You can also register by mail, fax, or telephone.
How to Pay
Yes, you read that right. This is another tax you will have to pay. Depending on your industry, you will likely owe GST every time you file your GST return. Usually only businesses that are considered to be selling zero-rated supplies get refunds. But the good news is, your business is most likely profitable if you owe GST to the government.
The most common filing period for the GST return is quarterly—every three months. Depending on your business’s volume of sales, you may file monthly or even annually. Filing of the return, as well as payment, is due by the month following the last day of the quarterly or monthly period.
If you’re an annual filer, you have three months after your fiscal year end to file your return. If you’re a sole proprietor your year end is December 31, and your GST return must be filed by June 15 of the following year. The payment, however, is due by April 30. You will be charged interest if you make your payment on the filing deadline of June 15.
Most banks and credit unions allow you to pay your GST through online banking. You can register CRA GST as a bill payment. The CRA will also send you a remittance form you can use to either pay at the bank or by mail.
If paying by mail, CRA considers your balance owing paid on the date they receive the cheque, not the postmarked date. Be sure to include your GST number on the cheque as well as the period of the GST return to ensure CRA allocates the payment to the correct account.