In my last chat, I discussed and answered the question, "What is GST / HST?"
Now I'll look at the process of GST registration / HST registration in Canada ... so you can claim your input tax credits.
HST stands for harmonized sales tax ... GST stands for goods and services tax. Get your cup of tea (bring the whole darn pot!) and meet me back here so we can start learning the ins and outs of GST/HST registration.
HST GST registration is mandatory if a business's taxable sales exceeds $30,000 annually.
If you are registered for GST, you are automatically registered for HST as well. I discuss how to file your GST/HST return in part two of this series.
The exceptions (there are always exceptions) are taxi or limousine operators. They must register regardless of their sales volumes.
If your business earns less than $30,000 in yearly sales, then registration is optional ... but hold on before you click away ...you may want to voluntarily register for GST/HST ... keep on reading to find out why.
Table of Contents
Registering For GST/HST
After You Are Registered
Place of Supply Rules Flowchart
Invoice Presentation Rules,
Self Assessing Out of Province Purchases, PST Basics in BC
Notice to Visitors
Before I begin I would like to remind you there is a difference between information and advice. The information provided in this article or on this site should not be construed as advice. Please make yourself familiar with my disclaimer.
|Goods and Services||Tax Rate||Claim ITC?|
|Taxable - all goods and services unless listed as exempt or zero-rated||GST 5%
|Zero-rated - basic groceries, prescription drugs and dispensing fees, medical devices, exports||0%||yes|
|Exempt - residential rent, used residential housing/complexes, long-term residential accommodation, most health, medical, and dental services, child care services, personal care services, tolls, legal aid services, many educational services, music lessons, most financial institutions and insurance services,some non-profit services||Exempt||NO|
Need more information? You will find a more complete listing of taxable and exempt items on the CRA website under Businesses> GST/HST> Taxable or Exempt? .
Good references for any bookkeeper or small business owner are these pdf documents:
Just as an aside ... I'm a dance fan ... can you believe that music lessons are HST exempt and dance lessons aren't? (Well there is an opportunity for some dance lessons to be HST exempt if you are a non-profit. See CRA's RC4081 page 11.) What's up with that? Both are performing arts! I just don't get it!!!!!
BC HST has point of sale rebates that went into effect July 1, 2010. Find out more here.
Ontario HST has rebates and exemptions that went into effect July 1, 2010. Find out more here.
P.E.I. HST will have rebates and exemptions that go into effect April 1, 2013. Find out more here.
It is recommended that you voluntarily register for GST/HST even if your annual sales are less than $30,000. Why? ... HST GST registration enables you to recover your input tax credits (ITCs) on business purchases and GST/HST paid on startup costs.
If you decide to voluntarily register (i.e. your sales are under $30,000 per year), you WILL be required to charge and collect GST/HST on your products and services that are not zero rated or exempt. You will also BE ELIGIBLE to claim input tax credits (see the next section for what this is all about.)
Let me just point this out ... if you are NOT a GST/HST registrant, you are NOT authorized to charge and/or collect GST/HST.
So what do you do if you are charged GST/HST by a business that is NOT registered?
What do you do if you charged your customers GST/HST but are NOT registered to do so?
Follow the links to find out how do deal with either of these circumstances.
ITCs are credits you are allowed to claim to recover any of the HST GST you paid on your business purchases. This means GST/HST is paid only by the end consumer as your GST/HST ITCs neutralize the tax for your business.
You must be registered to claim them. You cannot recover ITCs incurred prior to HST GST registration. This is where good tax planning comes in.
By voluntarily registering your business while you are in the startup stage, you will be able to recover your startup costs. If you wait to register, you have lost out on recovering your ITCs related to your startup costs. CRA does not allow (in most cases - there are always exceptions as I said earlier) you to retroactively register.
You can recover some of your missed startup ITCs after your HST GST registration
by ... bringing your capital assets that are still in use by your
business onto your books at their current fair market value ... and
claiming the GST/HST ITC on the transaction. ;O) Your expensed ITCs
prior to your registration are lost. :O(
You can find instructions and a worksheet to help you value your assets in accordance with CRA rules. Select the A to Z index on the left hand navigation bar. Under Business choose R. Look for Reporting > Business Income. Select Claiming capital cost allowance (CCA) > Personal use of property. Page down until you come to Changing from personal to business use.
Make sure you take time to educate yourself about CCA ... especially the available for use rules and when the first fiscal period is less than 365 days.
Consider this - By not being an HST GST registrant, you do lower your prices to your customers (hey they gotta love that) by 5% (our current rate) but hold on ... you also increase your cost of doing business 5% by not being able to claim the ITC as a non-registrant ... hmmm ...
There is the disadvantage that once HST GST registration occurs, you will have to track the GST/HST collected and paid out. But I think this disadvantage is offset by the reduction in your total taxes paid.
An added benefit of HST GST registration - it makes your business look more credible and legitimate. Remember, GST/HST is tax neutral to registered businesses. The customers that will be most affected by your decision to charge HST GST are retail customers. If most of your competitors are charging HST GST, then these retail customers should be neutral to you being a HST GST registrant and charging HST GST.
Once you have completed your free HST GST registration, you will have to file your first return. Here is what you should know.
The Smallbiz Builder Newsletter (September 2009) points out that CRA has a FIRST AUDIT PROGRAM FOR GST/HST. Its main objective is new businesses. The audit is triggered by filing your first HST GST return with a refund balance.
The CRA are interested in verifying the existence of your business and your startup costs. They also want to ensure you are aware of your rights and responsibilities and have adequate books and records.
If CRA finds your books and records are inadequate, they will make recommendations and answer any questions you may have.
There is no fee to register for GST/HST. You have a few ways available to you for HST GST registration:
If you are NOT registered with CRA (i.e. you do not have an authorized GST/HST number issued by CRA) then you CANNOT charge/collect GST/HST.
If you are registered for GST, then you are automatically registered for HST and vice versa. Please note that when BC switches back to GST and PST on April 1, 2013, you will have to register for PST, it is NOT automatic.
When you meet or exceed the small supplier threshold of $30,000 in a quarter, you are considered registered and must begin collecting GST/HST on all sales after the threshold has been met. HST GST registration must officially be applied for within 29 days of collection beginning.
If you meet or exceed the small supplier threshold of $30,000 over four consecutive quarters, you must begin collecting GST/HST one month after the fourth quarter. You have 29 days from when you begin collecting to officially register.
If you do not officially register when you meet the threshold of $30,000, you will lose your ITCs ... ouch! Expensive!
The February 2014 Federal Budget announced that CRA will be allowed to automatically register businesses if they have been notified and failed to comply. The automatic registration will occur 60 days after official notification. This change takes place effective with the Royal Assent of the enacting legislation.
If you require more information on HST GST Registration, the main CRA guide is Publication RC4022 General Information for GST/HST Registrants. However, there are a lot of pamphlets and booklets published by CRA. Some are specific to different industries like travel and convention, or construction. Here is an index to them all - GST/HST Publications and Forms.
In my opinion, the advantage of HST GST registration is it increases your cash flow and reduces your overall taxes ... which gives you the opportunity to grow your business.
This concludes Part One of my chat on HST GST registration.
Check Part Two of the Guide on stuff you need to know after you have completed your registration.
The Guide Index also has links to HST transitioning, HST bulletins, ITCs and your personal vehicle, GST/HST historical rates and compliance deadlines.
You'll find links to both of these pages below.
Main Reference Source: CRA publications and articles on HST GST Registration
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