Popularly known as GST is a 5% tax on taxable supplies of goods and services in Canada; this is also known as value added tax because as goods and services move, transfer or transfigure from one shapes to the other their value increased and GST as well. GST/HST is consumption tax as the final product is taxed in a whole at the hand of end consumer. The taxes apply not only to the sales of goods and services but also to the supply of goods and services. Supplying a goods and service means to provide it in any form including: sale, transfer, barter, exchange, licence, lease, gift or disposition.
Most of the provinces charged their own provincial sales tax (PST) over and above the GST; some provinces on the other hand combined the GST and PST into a harmonized sales tax (HST) system.
Provinces that are charging HST :
Provinces that are charging only GST:
Provinces that are charging GST and PST/QST:
GST/HST does not apply to…
Basic groceries Most foods to be prepared and consumed at home, including:
- fresh fruits and vegetables
- milk, eggs, dairy products (not including those sold as single servings, other than plain milk)
- sugar, flour, and baking supplies
- canned, frozen, and packaged food
- tea and coffee
- condiments such as jams, jellies, pickles, and ketchup
- meat, fish, and poultry
- breads and cereals
- fruit juices (except for single serving containers)
- non-carbonated natural spring water
- cakes and pies (full size)
- spices and herbs
- sweetened baked goods such as doughnuts and muffins (when sold in quantities of six or more)
Prescribed drugs these include:
- drugs prescribed or dispensed by a medical doctor or dentist for use by an individual
- drugs and other substances included in Schedule C, D, or G to the Food and Drugs Act
- certain drugs included in Schedule F to the Food and Drug Regulations
- certain drugs controlled under the Narcotic Control Act
Medical devices these include:
- hearing aids
- insulin infusion pumps and syringes
- ileostomy or colostomy appliances
- crutches and canes
- wheelchairs
- blood sugar and blood-ketone testing strips
- prescription eyeglasses and contact lenses
Agricultural products and most fishery products (fish for human consumption)
Financial services
Long-term residential rentals (of one month or more)
Exports
Exempt goods and services
- Long term residential rents but not business or industrial lease or rent
- Child care services
- Many govt. services, licence and registration fees for autos, property taxes
- Legal aid services
- Many educational and financial services including insurance and interests, i.e. mortgage interest
- Health, medical, dental services
- Previously owned or resale residential buildings
GST/HST REGISTRATION
Taxpayers whose taxable sales are $30000 or less in the previous four calendar quarters are not required to register for GST/HST remittance. Therefore they do not charge any GST/HST on the good s and services provided and may not claim input tax credit (ITC) for consuming taxable service or products. However, Taxi business and non-resident performers have to register for GST/HST regardless of their sales level.
Each and every registrant is provided a business number (BN) which is a unique identifier of the said business. BN includes four main accounts with CCRA and each and every account has different letter at the end that identifies the account, those accounts are
- RT – Goods and Services Tax/Harmonized Sales Tax
- RP – Payroll
- RC – Corporate Income Tax
- RM – Import/Export
- RZ – Information Return
GST/HST Filing frequency:
Each business should file returns and remit tax when their taxable sales are
| More Than | Less Than | Monthly | Quarterly | Annually |
| $6,000,000 | File & Remit | |||
| $500,000 | $6,000,000 | File & Remit | ||
| $500,000 | Remit | File |
- is more than $6,000,000 remits and files monthly
- is less than $6,000,000 but more than $500,000 remits GST/HST and files return quarterly, however the business can elect to file monthly
- Is less than $500,000 remits GST/HST quarterly, files return annually; however they can elect to file and remit monthly or quarterly. Installment payment is due one month after the end of each fiscal quarter. If the total tax remit is less than $1500 is not required to make installments, but to simply remit the tax owing with the annual return. This also applies if the current year net tax payable to be less than $1500.
You can recover the GST/HST you pay or owe on goods and services such as:
- merchandise to resell;
- advertising services;
- real property and capital property, such as office furniture, vehicles, and other equipment; and
- general operating expenses such as office rent, utilities, office supplies, and the rent of equipment such as computers, vehicles, photocopy machines, and other office appliances.
In addition, you can claim input tax credits for purchases of land and purchases eligible for capital cost allowance under the Income Tax Act, such as buildings, computers, vehicles, and other large machinery and equipment.
Expenses for which you cannot claim an input tax credit include the following:
- employee wages;
- interest and dividend payments;
- most federal, provincial, and municipal taxes;
- most fees, fines, and levies;
- tax-exempt goods and services;
- items for your personal use or enjoyment;
- capital property that is not primarily for use in your commercial activities; and
- membership fees or dues to any club that provides recreational, dining, or sporting facilities (e.g., fitness clubs, golf clubs, hunting and fishing clubs), unless you acquire the memberships to resell in the course of your business.
Motor Vehicles
No input tax credit is allowed for the tax payable on the purchase price of a motor vehicle in excess of the amount allowed under CCA provisions. If it is used more than 90% in business then full ITC can be claimed. When it is used less than 90% but more than 10% ITC is based on the CCA claimed.
Used Goods
If a business used capital property in commercial activities, the sale of that property is taxable. If a capital property is used is less than 50% in commercial activity no tax should be collected in the point of sale.
Trade-ins
If both vendor and the purchaser is registrant tax is charged on the full price of both transactions.
If the vendor is not registrant tax is charged on the net amount, i.e. (Price of the property less price of the trade-in property)
Meals and Entertainment Expenses
Most meal and entertainment expenses are limited to 50% deduction for income tax purpose. ITC can be claimed only the 50% deductible portion. For example if $100 is the net expense and $7 is tax then $50 will be reported expense and $3.5 will be the ITC claim.
Purchase of Business
If somebody purchased a business and he is a registrant then no tax should be charged unless the purchaser acquire 90% of the entire business. Form GST 44 should be filed.
How to claim an input tax credit
To find out the total input tax credits you’re entitled to claim for a reporting period, simply add up the GST/HST that you paid or owe on your business purchases made during the reporting period.
Most registrants claim their input tax credits when they file their GST/HST return for the reporting period in which the related purchases were made. However, you can generally claim your input tax credit in any return filed by the due date of the return for the last reporting period that ends within four years after the end of the reporting period in which the tax became payable on the purchase that qualifies for the credit.
All these list are not exhaustive, more details can be found in www.canada.ca.