When you first start selling goods or services to customers you will want to be onside with your responsibilities for charging GST on what you sell. Generally, most goods and services are taxable for GST. So if you’re unsure, it is best to contact a professional accountant for advice specific to what you are selling. Items which are exempt or charge a rate of 0% for GST include:
- Basic groceries
- Prescription drugs
- Most agriculture products and livestock
- Used residential housing
- Most residential rent
- Daycare services for children 14 years of age or younger
- Bank charges
- Insurance premiums
Do I Need To Charge Customers For GST?
What determines if your business should be registered for GST? The general rule is if your business provides a taxable service or product and your business has revenues in excess of $30,000 in one year.
Now that you are registered for GST and have a GST#, you have to start charging 5% GST on any sales of taxable items to customers. How this works is, that you have to remit (fancy word for paying to the government) all the GST you charged customers on your next upcoming GST filing deadline. For example, if you have to file GST for the period January 1, 2015 – March 31, 2015, you will have to pay all the GST that was charged to customers in that date range (minus any GST you paid on purchases, but we will limit this discussion to just sales). You will have to pay the GST even though some of the sales may not yet have been collected yet. This can present a cash-flow issue in that you have to pay the GST on a sale to a customer even though he or she has not paid their bill yet. The way you can offset paying GST on a sale you have not collected, is that if you decide on a future date that a particular sale still owing is actually uncollectible, you can claim that GST back on your GST return. So at the end of the day, you may have made the sale and paid the GST in the period January 1, 2015 – March 31, 2015, but if you decide the sale is uncollectible on May 1, 2015, then you can claim back the GST on the GST return for the period April 1, 2015 – June 30, 2015. As a result there is a slight timing of cash flows difference but any GST not physically collected from customers can eventually be claimed back.
If you are not 100% certain about your responsibilities relating to GST, or sales taxes in general, then you should speak to a professional accountant.
Contact us for a more in-depth discussion on this topic.
