How to Determine When to Charge GST for Your Business
As a new business owner, understanding when to start charging GST is essential to avoid penalties and stay compliant with regulations. The Goods and Services Tax (GST) is a federal tax that applies to most goods and services in Canada. The current rate of GST is 5%.
It's important to note that failure to comply with GST regulations can result in costly penalties. Therefore, it's crucial to have a clear understanding of when to charge GST and how to stay compliant with regulations. In this guide, we'll provide you with all the information you need to determine when to charge GST and ensure that your business stays on the right track.
When to Charge GST
To determine whether you need to charge GST, you must consider the gross sales of your business. Once your gross sales exceed $30,000, you are required to register for a GST number and start charging GST on all taxable supplies.
It's important to note that gross sales include all sales made by your business, regardless of whether the sales were taxable or not. For example, if your business made $40,000 in gross sales, including $5,000 in non-taxable sales, you are still required to register for a GST number and charge GST on taxable supplies.
However, if your gross sales do not exceed $30,000, you are not required to charge GST. In this case, you may choose to register voluntarily for a GST number if you make taxable sales, leases, or other supplies in Canada.
Benefits of Charging GST
As a business owner, you may wonder if there are any benefits to charging GST beyond compliance with tax regulations. Fortunately, there are several benefits to doing so.
GST Input Tax Credits
When you charge GST, you can write off the GST you pay to other businesses for supplies and services for your business. This is known as a GST Input Tax Credit (ITC). By claiming ITCs, you can lower your overall GST liability, resulting in a smaller tax bill.
Perception of Value
Some people believe that charging GST makes your business look more established and credible. If you're selling to other businesses, charging GST can make your business appear more professional and may increase your perceived value.
By charging GST when required, you can avoid penalties and interest charges that can result from non-compliance with GST regulations. This can help protect your business from costly fines and legal issues.
Where to Go for Reliable Information
When it comes to financial questions like when to charge GST, it's always best to go to credible sources. Directly to Revenue Canada's site or your own accounting and bookkeeping team. You can also consult professional accounting and bookkeeping services that can provide expert advice and support to ensure you stay compliant with GST regulations.
The Importance of Staying Compliant
Failing to comply with GST regulations can result in costly penalties, which is why it's crucial to stay compliant with the rules. By working with a reputable accounting and bookkeeping service, you can ensure that your business remains in good standing with the government and avoids unnecessary expenses and legal issues.
Get Professional Help from Censea Accounting & Business Solutions
At Censea Accounting & Business Solutions, we are dedicated to helping small business owners navigate the complex world of accounting and taxation. If you have questions about charging GST or need assistance with your bookkeeping, please book a call on our website. Our team of experienced professionals can provide expert advice and support to help secure the future of your growing business.
Article by Jennifer Walsh, CPB
Jennifer Walsh has been a bookkeeper for over 20 years and she's loved every minute of it. She loves helping business owners reach their financial goals so they can live the life they love, without having to worry about the numbers.