What You Need to Know About GST/HSTBrian Jang ON January 9, 2019
If you run a business in Canada, you may have some questions about the GST/ HST and you wouldn’t be alone if so. Below is a collection of some of the more common questions, and some answers to help you out.
Do I Need to Charge the GST/ HST?
The short answer is yes. You must charge customers the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST) when you sell goods and services in Canada. There are, however, some exceptions, discussed below.
What precisely you charge depends on the province. Some provinces (BC, Saskatchewan, Quebec, and Manitoba) do not have the Harmonized Sales Tax, as they have kept their provincial taxes separate from the federal tax system. They will therefore charge both a provincial tax and the GST, whereas other provinces would charge the HST.
Does My Online Business Need to Charge GST/ HST?
This is one of the most common questions. Again, the quick answer is “yes.” Your online business is taxed just as traditional businesses are, and in general, the same rules apply, although there are some different rules in different provinces, again related to whether the province charges HST, has a separate provincial tax (Quebec, BC, Sask, Manitoba), or no provincial tax (Alberta, Nunavut, Yukon, NWT)).
How Do I Calculate the GST/ HST?
Once again, this is dependant on your province. Those that charge the HST would simply charge the appropriate rate (for example, 13% in Ontario) on the goods and services. In provinces with no provincial sales tax, it is just as easy with 5% of an item’s sale price being added to the total cost.
In provinces where GST and the provincial tax are added individually, one would calculate both taxes and then add them to the total cost.
What is the Difference Between Zero-Rated and Exempt?
As a Canadian business owner charging GST/ HST, you will need to know the difference between GST/ HST zero-rated and GST/HST exempt goods and services. Though both appear the same to your customers, they are treated differently when filing your return, as GST/ HST zero-rated goods and services still allow you to claim Input Tax Credits on them, while this is not possible in the case of exempt goods and services.
What Sort of Good and Services are Exempt or Zero-Rated?
Some of the goods and services that fall under zero-rated include: basic groceries, farm livestock and equipment, prescription drugs and medical equipment, feminine hygiene products, and freight transportation services involving the transport of goods from Canada to another country, and vice-versa.
Goods and services that are considered exempt include music lessons, medical and dental services, issuing insurance policies, educational services, certain day care services, legal aid services, and most goods and services provided by charities.
Do I Charge GST/ HST on Discounts?
Yes, you do, but the method is quite simple in most cases.
The Canada Revenue Agency (CRA) differentiates between early-payment discounts and volume discounts. In the case of the former, one would charge GST/ HST on the full amount of the invoice, even if the customer takes the discount. In the case of the volume discount, the GST/ HST would be applied to the net amount after the discount has been applied.
This is just a sample of the many questions that are frequently asked about the GST/ HST. There is a great deal more, but hopefully this answers some of yours. More answers and greater detail can always be found with the CRA.
Tax questions? Contact BCJ Group today!