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GST Considerations For New Business Owners

The Goods and Services Tax or GST is a consumption tax which charged on most goods and services sold within Canada, regardless of where your business is available. Subject to certain exceptions, all companies are required to charge GST, currently at 5%, plus applicable provincial sales property taxes. A business effectively acts as an agent for Revenue Canada by collecting the taxes and remitting them on a periodic basis. Businesses will also permitted to claim the taxes paid on expenses incurred that relate to their business activities. Components referred to as Input Tax Credits.

Does Your Business Need to Ledger?

Prior to getting yourself into any kind of business activity in Canada, all business owners need to figure out how the GST and relevant provincial taxes apply to them. Essentially, all businesses that sell goods and services in Canada, for profit, are required to charge GST, except in the following circumstances:

Estimated sales for your business for 4 consecutive calendar quarters is expected to be less than $30,000. Revenue Canada views these businesses as small suppliers and perhaps they are therefore exempt.

The business activity is GST exempt. Exempt Goods and Services Tax Website and services includes residential land and property, child care services, most health and medical services etc.

Although a small supplier, i.e. a business with annual sales less than $30,000 is not required to file for GST, in some cases it is good do so. Since a business could only claim Input Tax credits (GST paid on expenses) if considerable registered, many businesses, particularly in the start up phase where expenses exceed sales, may find them to be able to recover a significant quantity of taxes. This ought to balanced against prospective competitive advantage achieved from not charging the GST, and the additional administrative costs (hassle) from to be able to file returns.