It depends on the following three main factors:
- Nature of supplies
- Status of supplier
- Nature and level of purchase you made
Nature of Supplies
If your business is just making GST/HST exempt supplies of goods/services, then you don’t need to register for GST/HST. GST/HST exempt supplies include educational services, medical or dental services, and food & beverages.
Status of Supplier
If you meet the criteria for small supplier and you are not one of the exceptions to the small business supplier, then you don’t need to register for GST/HST.
Criteria for Small Supplier
If the total taxable supplies of all your businesses are equal to or less than $30,000 in the last four consecutive calendar quarters and in any single quarter.
Taxable supplies would include all your worldwide supplies subject to GST/HST including zero-rated supplies and the supplies of your associates too. However, revenue from financial services, goodwill, and sale of the capital property would not become part of the total revenue.
Exceptions to Small Supplier
The following are the businesses that must register for GST/HST even if they are small suppliers
- Taxi and limousine operators
- Non-resident performers
Mandatory Registration for Small Supplier
A small supplier must apply for GST/HST registration within 30 days of first taxable supply.
Nature and level of purchases you made
If you are making purchases of taxable goods in the normal course of your commercial activities and you are not registered for GST/HST then you will not be able to claim input tax credits for GST/HST paid and this will become a cost for your business resulting in reduced margins. For a small business, therefore, the amount of GST/HST paid on purchases could be a considerable amount.
Getting registered voluntarily even if you are a small supplier would enable you to recover GST/HST paid on your purchases in the form of input tax credits.
Disallowed Input Tax Credits
The following are some purchases upon which you can’t claim input tax credit even after registration:
- Goods/services bought for personal use instead of business
- Capital property
- “Membership fees or dues to any club whose main purpose is to provide recreation, dining, or sporting facilities” (CRA).
Registration also has an advantage that you can claim your input tax credits up to four years from the end of the reporting period to which they relate. It means you don’t need to claim in the same tax year.
A new registrant would also be able to claim input tax credits for GST/HST due on purchases or paid on inventory he has in hand when he gets registered.
How to register for GST/HST
To get registered for GST/HST you would need the Business Number(BN). This BN will be your identification for communication between you and CRA.
“To set up a BN, a GST/HST account, and any other account you can use CRA’s online service at Business Registration, or send us a completed Form RC1, Request for a Business Number.
To register for a business number or a program account by phone, call our business inquiries line at 1-800-959-5525. For hours of service, go to Hours of telephone service.
Before calling, be ready to answer all the questions in Part A of Form RC1, Request for a business number and certain program accounts, and any other questions in the form about the program account you want to open.”(CRA)
The information provided in this article is general information and cannot be used specifically for a business without expert advice. Any other questions feel free to ask our tax accountants team in toronto.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.