Canada's tax system is complex, and it is essential to understand what is Canadian GST/HST and how GST/HST works. This post will provide a comprehensive overview of GST/HST and discuss how it affects Canadians.

An Overview of the Canadian GST/HST

The Goods and Services Tax is a broad-based consumption tax that applies to most sales of property and services in Canada. Canada Revenue Agency (CRA) administrates the GST. In some provinces, the GST is combined with provincial sales tax (PST) to create a harmonized sale tax (HST). 

What Is the Canadian GST/HST?

A value-added tax imposed by the federal government is known as the GST. It applies to most sales of property and services in Canada, charged at a rate of 5%. In many provinces, the GST has been "harmonized" with the provincial sales tax to become Harmonized Sales Tax (HST). HST includes the federal and provincial portion of the sales tax and applies under the same legislation as the GST.

Who Has to Pay the GST/HST?

Generally, businesses that provide taxable goods and services in Canada must register for the GST/HST and collect it from customers. However, certain exemptions, such as charities, non-profits, and small businesses, have an annual revenue below the registration threshold.

How to Register for a GST/HST Account

First, businesses must obtain a business number (BN) from the Canada Revenue Agency (CRA) to open HST account. Companies must complete Form RC1, Request for a Business Number, which can be obtained online or through a local CRA office. After getting BN, businesses can register for a GST/HST account by completing Form RC2, GST/HST Registration Application.

After completing the form, you can submit it to the CRA via mail or online. The CRA will then evaluate your application and, if approved, will issue you a GST/HST account number. This number reports and remits GST/HST on all applicable sales and purchases.

It is important to note that GST/HST is not always applicable to all sales and purchases, and some items may be exempt from GST/HST, such as certain medical and healthcare items, books, and children's clothing. It is essential to confirm whether or not GST/HST applies to any item before collecting and remitting it.

What Are the Benefits of Opening a GST/HST Account?

Opening an HST account and collecting GST/HST has several benefits, including:

Tax Compliance: Registering for a GST/HST account ensures that your business is tax compliant, reducing the risk of penalties or fines due to non-compliance.Increased Credibility: Collecting GST/HST shows that your business is legitimate and professional, which can help to increase customer confidence.Improved Cash Flow: Collecting GST/HST allows you to collect the tax at the point of sale, which can help improve cash flow.Government Assistance: Registering for an HST account may make you eligible for certain government programs, such as the Goods and Services Tax/Harmonized Sales Tax Credit.Increase in Accounting Efficiency: By registering for your GST/HST number, you can streamline your accounting process and increase efficiency. You'll know exactly where taxes are due, who to pay them, and when they need to be paid, making it easier to manage your finances.Avoid Penalties and Interest: By registering for a GST/HST account, businesses can avoid paying interest and penalties for late filing and remitting of taxes.Increased Business Opportunities: With a GST/HST account, businesses may have access to new opportunities such as government contracts and grants.
Final Thoughts

The GST/HST is an essential part of doing business in Canada. Understanding the rules and regulations associated with the tax and properly setting up an HST account is critical for any business that operates in Canada. Companies need to consult with a professional advisor when dealing with GST/HST to ensure that they comply with the rules and regulations.