Items and Services Tax or GST can be a consumption tax which is charged of many goods and services sold within Canada, no matter where your company is located. At the mercy of certain exceptions, all companies are needed to charge GST, currently at 5%, plus applicable provincial sales taxes. A company effectively represents a realtor for Revenue Canada by collecting the taxes and remitting them with a periodic basis. Companies are also permitted claim the required taxes paid on expenses incurred that report with their business activities. These are generally termed as Input Tax Credits.

Does Your Business Need to Register? Just before doing just about any commercial activity in Canada, all businesses have to determine how the GST and relevant provincial taxes sign up for them. Essentially, all companies that sell products or services in Canada, for profit, are needed to charge GST, with the exception of the following circumstances:

Estimated sales for your business for 4 consecutive calendar quarters is expected to become lower than $30,000. Revenue Canada views these firms as small suppliers and they are generally therefore exempt.

The business enterprise activity is GST exempt. Exempt services and goods includes residential land and property, nursery services, most health and medical services etc.
Although a small supplier, i.e. a business with annual sales under $30,000 isn’t required to produce GST, occasionally it can be best for do so. Since a company can only claim Input Tax Credits (GST paid on expenses) if they are registered, many organisations, particularly in the start-up phase where expenses exceed sales, may find actually able to recover a lot of taxes. This has to be balanced against the potential competitive advantage achieved from not charging the GST, plus the additional administrative costs (hassle) from being forced to file returns.

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