All You Need to Know About GST / HST in Canada

August 4, 2020

All you need to know about GST and HST in Canada

Introduction:

The Harmonized Sales Tax is a consumption tax in Canada. It is used in provinces where both the federal goods and services tax and the regional provincial sales tax have been combined into a single value-added sales tax i.e. HST. For Ontario – HST is 13%; if your business collects GST/HST on sales, it must be remitted to the CRA after adjusting the Input Tax Credit i.e. ITCs.

The main point of HST is that it is to be paid by the final customer. HST gets charged throughout the supply chain from the manufacturer to the distributor, to the retailer, and then to the final customer. Let’s assume that you need to purchase a computer. The computer will cost you around $300, what is the break-up of this price and how it flows along from the manufacturer to the end customers is well explained in the below table. This table will also elaborate on how each entity claims input tax credit (ITC) and pays the net HST to the CRA:

Manufacturer Distributor Retailer Customer
– Gross Price for the Distributor $100
– HST 13%
– HST charged from the Distributor $13
– ITC $0
– Net HST Payable to CRA $13
– Net Price charged to the Distributor $113
– Gross Price for the Retailer $200
– HST 13%
– HST charged from the Retailer $26
– ITC $13
– Net HST Payable to CRA $13
– Net Price charged to the Retailer $226
– Gross Price for the Customer $300
– HST 13%
– HST charged from the Customer $39
– ITC $26
– Net HST Payable to CRA $13
– Net Price charged to the Customer $339
– Final Price charged to Customer $339

When to register for a GST/HST account in Canada?

If you are dealing with exempt supplies, there is no need to register for a GST/HST account. But if you are dealing with taxable supplies in Canada and you are not a small supplier, you need to get yourself registered with the CRA for a GST/HST account. For a small supplier, the revenue from the taxable supplies must be equal to or less than $30,000 in a calendar quarter and over the last 04 consecutive calendar quarters and that is not eligible for the GST/HST account in Canada.

HST Methods

Two methods are being used in the calculation of HST i.e. 1) Regular Method of HST, 2) Quick Method of HST. The quick method of HST is comparatively simpler than the regular method of HST. It is easy for small businesses to calculate HST to be remitted to CRA. Using the quick method, you charge HST at 13% on all taxable supplies but the amount to be remitted to the CRA is calculated by multiplying a single applicable rate with the amount of taxable supplies (including GST/HST). In a quick method of HST calculation, sales must not exceed $400,000 the applicable remittance rate varies industry to industry. Moreover, certain industries are not allowed to use a quick method of HST. We have elaborated HST calculated using both methods as follows:

Regular Method of HST
Taxable Sales $20,000
GST / HST 13%
Taxable sales including HST 22,600
HST Charged on Sales 2,600
Taxable Expenses 4,000
HST Paid on Expenses (ITC’s) 520
HST on Sales minus HST on Expenses 2,080
HST to be remitted to the CRA 2,080

 

Quick Method of HST
Taxable Sales $20,000
GST / HST 13%
Taxable sales including HST 22,600
Remittance Rate 8.80%
Multiply remittance rate with taxable sales (including HST) 1,988.80
Less: ITC Adjustment -300
HST to be remitted to the CRA 1,688.80

HST Filing and Payment Deadlines:

The filing and payment deadlines will be different depending on the HST filing period. HST can be filed monthly, quarterly, and annually. We have mentioned HST filing and payment deadlines in a table below:

Reporting Period Filing Deadline Payment Deadline Example
Monthly One month after the end of the reporting period One month after the end of the reporting period Reporting Period: Jul 31
Filing Deadline: Aug 31
Payment Deadline: Aug 31
Quarterly One month after the end of the reporting period One month after the end of the reporting period Reporting Period: Mar 31
Filing Deadline: Apr 30
Payment Deadline: Apr 30
Dec 31 Fiscal Year June 15 April 30 Reporting Period: Dec 31
Filing Deadline: Jun 15
Payment Deadline: Apr 30
Other Fiscal Year 3 months after fiscal year-end 3 months after fiscal year-end Reporting Period: Aug 31
Filing Deadline: Nov 30
Payment Deadline: Nov 30

HST Payment Guide

We have elaborated a step-by-step payment guide for the HST payment in a separate document that you can open and get yourself familiar with the payment guide of both Corporate tax and the HST mentioned in the CRA Payment Guide.

There are many ways through which you can file your HST return with the CRA as follows:

To Pay Electronically

Use the Canada Revenue Agency’s My Payment service page. My Payment is an electronic service that lets you make payments directly to the Canada Revenue Agency (CRA) using your bank access card. This service uses Interac e-Transfer to allow individuals and businesses to make payments directly to the CRA from their online banking account. Note: Not all financial institutions have Interac e-Transfer facility.

To Pay by Phone

You may also use your bank or credit card’s internet or telephone banking services to pay your GST/HST. Your accountant will prepare the HST return for a period and you may make the payment (if any) to the CRA on-the-go.

Pre-authorization

CRA gives you a facility to pre-authorize GST/HST payment for any period. You may authorize the Canada Revenue Agency (CRA) to debit a GST/HST payment amount directly from your bank account on a specified date. Pre-authorized debit payments can be set up using the CRA My Business Account service.

Walk-in Payment

HST payment can be made by going directly to a financial institution. In this way, you would be required to use the RC-158 form and proceed with the Netfile/Telefile remittance voucher.

Payment through CRA’s Mail

This is another way through which you can make the GST/HST payment and i.e. by completing the personalized GST/HST Return that you will receive from the CRA via mail. All you need to do is to mail them back the remittance voucher with a cheque or money order payable to the Receiver General to the address on the back of the voucher. Also, make sure to write your 15-character business number on the back of the cheque or money order.

If you are unable to receive your personalized GST Return, you can request the form GST62 i.e. Goods and Services Tax/Harmonized Sales Tax Return by calling the Canada Revenue Agency’s Forms and Publications Call Centre at +1-800-959-2221.

Note: GST/HST Payments of $50,000 or more must be made at a financial institution, credit union, or corporation authorized under the laws of Canada or a province.

Online Filing of GST/HST

As of July 1, 2010, certain businesses must file their GST/HST returns electronically:

GST/HST registrants with greater than $1.5 million in annual taxable supplies (except for charities); or all registrants required to recapture input tax credits for the provincial portion of the HST on certain inputs in Ontario or British Columbia; or builders affected by the transitional housing measures announced by Ontario or British Columbia” (Canada Revenue Agency News Release).

All GST/HST registrants are encouraged to use the electronic GST/HST return filing method. The Canada Revenue Agency offers a variety of payment options, which are available to all eligible GST/HST registrants, except for those who are residing in Quebec:

GST Netfile

With GST Netfile, you complete your GST/HST return online and send it to the Canada Revenue Agency directly via the internet (Note: Using GST Netfile requires an access code; you should receive it in the mail from the Canada Revenue Agency). To pay any GST/HST owing, you will need to pay using one of the following four methods which are mentioned below:

  1. GST/HST Telefile

You may call at 1-800-959-2038 and proceed as instructed to file your GST/HST return. If you do this, you will need to pay the GST/HST owing by mail, through your financial institution, or electronically using the Canada Revenue Agency’s My Payment electronic payment service.

  1. Electronic Data Interchange (EDI)

Electronic Data Interchange (EDI) uses a computer-to-computer exchange of information in a standard format to file and pay your GST/HST return. After registering with your financial institution), you may supply GST/HST return and payment information via computer or phone which is then converted to the appropriate GST/HST return format and transmitted payment to the CRA.

  1. GST/HST Internet File Transfer

This internet-based filing service allows all eligible registrants to file their GST/HST returns directly to the Canada Revenue Agency over the Internet using their third-party accounting software. You will need to pay any GST/HST owing by mail, through your financial institution, or electronically using the Canada Revenue Agency’s My Payment electronic payment service.

  1. My Business Account

My Business Account is an online Canada Revenue Agency service that allows businesses to manage a variety of tax-related business activities including GST/HST, payroll, corporate income tax, etc. You can use it to file/adjust GST/HST returns, view account balances, manage direct deposits, and view rebates.

If you do not file a GST/HST Return on Time

There would be no penalty imposed by the CRA on the late filing of your GST/HST return if your balance in a GST/HST account is $0 or negative. But if there is a balance owing in your account and your return is late, you will be imposed CRA’s penalty.

Role of GTA Accounting

GTA Accounting can help you file your GST/HST return, fulfill all requirements of the CRA especially to the electronic filing, assess your business natures, and may recommend you to shift on the Quick Method of HST calculation that may save you a lot of money. Please feel free to reach out to us.

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