GST/HST is a sales tax levied by the federal and provincial government on taxable supplies sold in Canada. Generally, most property and services sold are taxable supplies, but there are other types of supplies where GST/HST are not charged, being exempt supplies and zero-rated supplies. More information on these types of supplies can be found on the Government of Canada website.
All persons carrying on a business in Canada are required to register for and collect/remit GST/HST unless they are deemed to be small suppliers. Individuals who carry on a business are small suppliers when their total worldwide revenues from taxable supplies, including those made by associates, do not exceed $30,000 in the four preceding calendar quarters. It should be noted that carrying on a business does not include activities that are engaged in without a reasonable expectation of profit (e.g., hobbies) or activities engaged in for the purpose of making exempt supplies. Voluntary registration is still available for small suppliers and would be recommended if the small supplier is paying large amounts of GST/HST on purchases made for business purposes. Registering would allow the small supplier to recover the GST/HST paid on those purchases through Input Tax Credits (“ITCs”). To successfully claim ITCs, it is necessary to maintain the appropriate documentation, such as payment receipts and invoices. It should be noted that taxi or ride-sharing service operators are required to register regardless of their revenues.
All persons registered for the GST/HST must file GST/HST returns regularly based on their reporting period determined by the following table:
| Annual Taxable Revenues | Reporting Period | Optional Reporting Period |
|---|---|---|
| $1.5M or less | Annual | Monthly, Quarterly |
| $1.5M - $6M |
Quarterly | Monthly |
| Over $6M | Monthly | None |
Where a person has a monthly or quarterly reporting period, the GST/HST return and a payment of any balance owing, calculated as GST/HST to remit less any ITCs claimed for the reporting period, will be due one month after the end of the reporting period. For those with an annual reporting period, the GST/HST return and a payment of any balance owing is due within three months after the end of the reporting period.
Where possible, it may be beneficial to elect for a shorter reporting period for cash flow purposes. If the person expects a refund by virtue of their ITCs exceeding the GST/HST that the person is required to remit, they will be able to receive that refund sooner by filing more frequently. That being said, where an election has been made to file more frequently, the person must continue to do so for the entire fiscal year and thus an election for such purposes should be considered carefully before being made.
- Bowen, Young Tax Professional