For Canadian businesses, understanding how to register and file for Goods and Services Tax (GST) and Harmonized Sales Tax (HST) is essential to staying compliant with tax regulations. Depending on your location and business activities, you may need to charge and remit either GST or HST to the Canada Revenue Agency (CRA). Navigating these tax rules can seem overwhelming at first, but following the right steps ensures your business operates smoothly and avoids penalties.
In this blog, we’ll guide you through the process of registering for GST/HST with the CRA and provide key tips on how to file your returns accurately and on time.
1. What is GST and HST?
In Canada, GST (Goods and Services Tax) is a federal tax applied to most goods and services sold across the country. It’s set at a rate of 5% and applies in provinces that do not use HST.
HST (Harmonized Sales Tax) is a combination of the federal GST and provincial sales tax. It applies in provinces where both taxes are combined into a single tax, with rates varying depending on the province.
GST-only provinces: Alberta, British Columbia, Manitoba, Saskatchewan, Quebec, Northwest Territories, Yukon, Nunavut.
HST provinces: Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador.
HST rates range from 13% to 15%, depending on the province.
Why It Matters: As a business owner, you need to know which tax applies based on the province where your business operates or where your customers are located. If your business provides goods or services across different provinces, you may need to charge either GST or HST depending on the customer’s location.
2. Who Needs to Register for GST/HST?
If your business earns more than $30,000 in revenue over a 12-month period, you are required to register for a GST/HST account with the CRA and begin collecting and remitting taxes.
For small suppliers (businesses earning less than $30,000 in revenue): Registration is optional, but voluntarily registering can provide benefits, such as claiming input tax credits (ITCs) on your business purchases. ITCs allow you to recover the GST/HST paid on business expenses, reducing your overall tax liability.
Tip: Even if your business is below the $30,000 threshold, it may be worth registering voluntarily, particularly if you incur significant GST/HST on purchases. This allows you to claim input tax credits and offset taxes paid on your business expenses.
3. How to Register for GST/HST with the CRA
Registering for a GST/HST account is a straightforward process that can be done online, by phone, or by mail.
Online Registration: The quickest and easiest way to register is through the CRA’s Business Registration Online (BRO) portal. You’ll need a business number (BN), which is a unique identifier for your business across all CRA accounts. If you don’t already have a business number, you can apply for one during the registration process.
By Phone or Mail: Alternatively, you can register by calling the CRA’s Business Enquiries Line or by mailing a completed Form RC1 – Request for a Business Number to the CRA.
Once registered, you will receive a GST/HST account number, which you’ll use for filing returns and remitting taxes.
Tip: If your business operates across multiple provinces, be sure to register for the correct tax (GST or HST) based on where your sales occur. Different provinces may have different requirements for tax registration and filing.
4. Charging and Collecting GST/HST
Once you’re registered for GST/HST, you’ll need to start charging tax on all taxable goods and services provided in Canada. The tax rate depends on the customer’s province:
In provinces that charge HST, you must charge the full HST rate (13% to 15%).
In provinces that charge GST and a separate provincial sales tax (PST or QST), you only charge the 5% GST, while the customer is responsible for any applicable provincial sales tax.
Example: If your business is based in Ontario, you would charge 13% HST on sales within Ontario. However, if you sell to a customer in Alberta, you would only charge the 5% GST.
Tip: Ensure that the GST or HST is clearly displayed as a separate line item on your invoices and receipts. This makes it easier for customers to see how much tax they are paying and helps you keep accurate records for filing purposes.
5. Filing Your GST/HST Return
Once you start collecting GST/HST, you’ll need to remit these taxes to the CRA by filing a GST/HST return. The filing frequency depends on your annual revenue and what the CRA assigns when you register:
Annual filing: For businesses with annual taxable sales under $1.5 million.
Quarterly filing: For businesses with annual taxable sales between $1.5 million and $6 million.
Monthly filing: For businesses with taxable sales over $6 million annually.
Your GST/HST return requires you to report both:
GST/HST collected: The total amount of tax collected from customers.
Input tax credits (ITCs): The GST/HST paid on eligible business expenses, which you can claim as credits to reduce the amount of tax owed.
Tip: Keep detailed records of all sales and expenses throughout the reporting period. This makes filing easier and ensures that you claim the correct input tax credits, which can significantly reduce your tax liability.
6. GST/HST Filing Deadlines
The deadlines for filing and paying your GST/HST depend on your filing frequency:
Annual filers: Your return and payment are due three months after your fiscal year-end.
Quarterly and monthly filers: Your returns are due one month after the end of each reporting period.
Tip: Missing filing deadlines can result in penalties and interest charges, so it’s important to stay organized and file on time. Consider setting up reminders or using accounting software to track filing deadlines.
7. Common GST/HST Mistakes to Avoid
While the GST/HST system is designed to be straightforward, there are common mistakes that businesses make when filing. Here are some to watch out for:
Not registering on time: Ensure you register as soon as your sales exceed $30,000 in a 12-month period. Failure to do so can result in fines.
Overclaiming input tax credits: Only claim ITCs for legitimate business expenses. Personal expenses are not eligible.
Missing deadlines: Late filings and payments can lead to penalties. Stay on top of your filing schedule.
Tip: Consider using accounting software that integrates with the CRA’s My Business Account portal. Tools like QuickBooks or Xero can help track GST/HST collected, automate your filings, and ensure you file on time.
Final Thoughts
Registering and filing for GST/HST with the CRA is a crucial aspect of running a business in Canada. By understanding the different tax requirements, keeping accurate records, and filing your returns on time, you can ensure compliance and avoid costly penalties. Whether your business is new or growing, staying on top of GST/HST obligations is key to financial health and success.
At BLAS, we specialize in helping businesses manage their GST/HST compliance. Whether you need help with tax registration, tracking, or filing returns, our team is here to ensure you stay compliant and focused on growing your business. Contact us today for expert support.