GST Tax Returns in Canada

Are you a business collecting GST and HST? In case you are a business operating in Canada, you will need to deal with the Goods and Services Tax for the services and products that you provide. However, filing GST returns in Canada need not be complicated. There are specific, easy-to-follow laws that govern the filing of GST returns.

This guide should help you understand the rules that govern how to file GST tax returns easily. We will understand every step involved in tax filing, from registration to payment.

What are GST Tax Returns in Canada?

GST tax returns report the taxes collected and paid by businesses to the Canada Revenue Agency (CRA). This report includes details on how much Tax you have collected from customers and how much you have paid as business expenses.

You can treat the tax returns as a balance sheet of sorts. You collect taxes when you sell your products and services. You will pay taxes when you buy products and services for your business. The GST return will help you calculate the difference between the taxes paid and those collected.

In Canada, GST (Goods and Services Tax) is a federal consumption tax applied to most goods and services sold in Canada. It’s currently set at 5% at the federal level.

Importance of filing GST tax returns

Filing GST returns is about managing your business and finances properly. When you file GST returns, you are complying with the law and maintaining the right balance for your business transactions.

When you file your GST returns, you are allowed to claim input credits. This is referred to as Input Tax Credits (ITCs). This would mean you can recover the taxes you paid when you avail of any services for your business.

Filing your GST returns are essential. Failing to file your returns on time or filing them incorrectly can result in penalties. The CRA will charge you a 1% penalty on the Tax you owe, and then an additional 0.25% on that amount for every subsequent month you are late in submitting. It should be remembered that these penalties can add up quickly and create a financial burden.

Filing your GST taxes on time will also help you have a good standing with your business. That would establish you as a reliable and responsible business owner.

Apart from that, proper GST returns will also help you gain a proper understanding of your business and its financial status. It should help make appropriate business decisions.

Canada GST Tax Rate

At the federal level, Canada charges a GST tax rate of 5%. However, total taxation may depend on where you operate your business.

In some of the provinces, the GST is combined with the local or provincial taxes to create HST or Harmonised Sales Tax. Some other provinces may charge GST and provincial taxes separately. Thus, your total tax liability may be dependent on the location your business operates.

Here is a list of provinces and the taxation followed by these provinces

Province/Territory	Type of Tax	Total Sales Tax Rate	Breakdown (GST + PST/HST/QST)
Alberta	GST Only	5%	5% GST
British Columbia	GST + PST	12%	5% GST + 7% PST
Manitoba	GST + PST	12%	5% GST + 7% PST
Saskatchewan	GST + PST	11%	5% GST + 6% PST
Ontario	HST	13%	13% HST (5% GST + 8% PST)
Quebec	GST + QST	15%	5% GST + 9.975% QST
New Brunswick	HST	15%	15% HST (5% GST + 10% PST)
Nova Scotia	HST	14%	14% HST (5% GST + 8% PST)
Prince Edward Island	HST	15%	15% HST (5% GST + 10% PST)
Newfoundland & Labrador	HST	15%	15% HST (5% GST + 10% PST)
Northwest Territories	GST Only	5%	5% GST
Yukon	GST Only	5%	5% GST
Nunavut	GST Only	5%	5% GST

In the above table, GST refers to federal GST, and HST refers to Harmonised sales tax, which combines GST and provincial taxes. PST refers to provincial sales taxes, and QST refers to Quebec Sales Tax.

Register for GST/HST

The first step is to register for GST. You can do so through the Canada Revenue Agency. If your business earns more than $30000 in taxable income quarterly, you are expected to register and get your GST number.

How to register for GST/HST?

You can register online through the CRA Business Registration Online service. The GST application will need your basic business information. This would include your legal structure, business address, and estimated Canadian sales.

While there are several methods available for registration, the online process is the easiest and simplest.

Eligibility Criteria for Registration

You should register for GST if your taxable income exceeds $ 30,000 over the past 4 consecutive quarters. For public sector undertakings, this limit is $ 50,000. If you are a business that imports goods into Canada, you should register irrespective of your revenue.

You can register even if your revenue is under $ 30,000. But it is not mandatory. However, registering has its own benefits.

GST Registration for Non-Residents

If you are a non-resident business having business operations in Canada, you have specific registration requirements. If they carry on business in Canada, they must register immediately. But you will need to submit additional documents.

The additional documents include your business registration certificate from your home country. You also need proof of your local tax ID and business description.

Registration for non-residents may take one to three weeks. If more verification is needed, it can be delayed a bit more.

GST Filing Process in Canada

The GST filing process may seem a bit cumbersome for first-time filers. However, once you understand the steps, it should become an easy routine.

Understand the GST filing process

Filing GST involves reporting the total taxes you have collected from your customers. You will also have to report the total taxes you have paid when availing the services and products for your business.

The difference between the two will determine whether you will get a refund or any taxes you owe to the federal government. The GST filing is typically done using Form GST34. This form summarises total sales, GST collected, ITCs claimed, and adjustments.

Track GST on Sales and Purchases

Proper documentation is the key to an adequate GST filing. Track all the taxes that you have collected from the customers. This is called Output tax. Also, track the GST you have paid on your business purchases. This is called Input Tax.

Keep all your invoices ready and filed properly. It can help you save time.

Choose a Filing Method

Canada offers several methods for filing your GST returns. The most convenient option among them is to use the My Business Account on the CRA website. You can also use other options, such as third-party service providers.

One Accounting offers you a complete solution for filing your GST returns. Call us to learn how we can help you file your returns hassle-free.

How to File GST Returns in Canada?

It may not be very clear at first how to file your GST returns. The following step-by-step method should help you address the concern rather easily.

Register for a GST Number

Register at CRA and get your GST number. This is the universal number you would use for all your transactions. It lets you charge GST to your customers and file returns.

Keep Accurate Records

Maintain a regular, up-to-date record of your purchases and sales. These would serve as the basis for your GST returns filing.

Calculate Your GST Liability

Before filing your returns, calculate the GST you owe to CRA and the GST you should get back.

Complete Your GST Return

Go to My Business Account and file your return online. You can choose your reporting period and other relevant details. If you are not an expert, you can select a third-party service provider like One Accounting to do it on your behalf.

Review and Submit

Before submitting your returns, check everything and make sure the details are accurate. Inaccurate filing can invite penalties.

Make a Payment or Claim a Refund

Check if you owe taxes or are eligible for a refund. Proceed with the payment or request a refund.

GST Tax Return Deadlines in Canada

Staying in tune with the GST tax return deadlines is essential. This will help you avoid penalties for late filing or late payment.

You can choose from among three filing windows.

Monthly Filing

If your annual taxable income exceeds $6 million, you must file monthly. Submit your tax details within one month of the date that the reporting period ends.

Quarterly Filing

If your taxable income lies between $1.5 million and $6 million, you can opt for quarterly filing. Quarter 1 filing ends on April 30. Subsequent filing deadlines would be calculated accordingly.

Annual Filing

If you are a small business with taxable income of less than $1.5 million, you can opt for annual filing.

Consequences of Missing Deadlines

Missing the deadlines can have serious consequences. It can invite automatic penalties, which the CRA would take seriously. Interest charges would apply to the unpaid taxes. Late or non-filing can trigger CRA audits.

Penalties for Late Filing

A proper understanding of the penalties will help you avoid them.

Penalty for Filing Late

The penalty will be 1% of the taxes you owe. In addition, you will incur 0.25% on this 1% penalty per month until your taxes remain unpaid.

Penalty for Not Filing Electronically

Certain businesses are expected to file their return electronically. If you fail to do so, you will incur a penalty of $100 for the first time. $250 will be levied each time you fail to file your returns electronically.

Penalty for Incorrect Reporting

Incorrect reporting is viewed very seriously. The penalties would be 5% of the amount misreported. There will be an additional 1% penalty on this amount per month until it is corrected.

GST Compliance in Canada

The GST compliance is not just about filing correct returns in Canada. There are several other regulations that you are expected to abide by.

You should charge the correct GST for your customers.
You need to maintain proper financial records
You are expected to file accurate returns.
You should remit your taxes promptly

Any discrepancy in following the GST regime will result in the loss of your input tax credits, heavy fines, and audits by the CRA.

In many cases, outsourcing these liabilities can help you comply with the requirements. One Accounting and similar firms can be an invaluable asset in this context.

Canada GST Reporting Requirements

As a business required to file GST returns, you need to keep a few important books. These can help you file accurate returns and also stay compliant.

Sales Invoices and Receipts

Keep all records of invoices issued to customers. These should include taxable, exempt, and even zero-rated invoices. These are used as proof for the GST collected.

Purchase Invoices and Bills

These invoices include the payments you have made for your business expenses. These help you claim input tax credits.

GST Collected and ITC Summaries

This will include the complete summary of the GST collected and paid. Many accounting software tools generate these records automatically.

Bank and Financial Statements

These include all your financial transactions. Your bank statements, credit card statements, and other ledgers form part of these statements.

Contracts, Agreements, and Leases

Maintain proper records of contracts for sales, services, and other business requirements.

Import/Export Documentation

If your business is involved in exports and imports, you will need to maintain records of all these details.

How can One Accounting help you with GST/HST filing?

Business owners tend to be very busy. Managing the GST and HST returns can get overwhelming for them. One Accounting offers you the best choice for outsourcing your GST tax returns. Our team of certified accountants brings extensive experience in GST/HST filings. They ensure accurate reporting and timely filing.

Filing GST returns doesn’t have to be stressful. With a proper understanding and the right support, you can confidently manage your GST obligations. Stay organised, meet your deadlines, and don’t hesitate to seek professional help when needed. Your business will benefit from accurate, timely GST filing that keeps you compliant and maximises your input tax credits.