Canadian businesses that sell “taxable supplies” in excess of $30,000 worldwide are required to collect GST and remit it to CRA. The business must register for a GST account and file periodic returns with CRA.
Canadian businesses with taxable supplies below $30,000 are not required to collect GST or register for a GST account; however, they have the option of voluntarily registering. This can be beneficial in the start-up phase of a business when its expenses often exceed its revenues, resulting in a GST refund owing to the business.
Taxable supplies are goods and services supplied in the course of a commercial activity. It includes “zero-rated” supplies, but not “exempt” supplies.
A “zero-rated supply” means GST applies to the sale, but the rate is 0% (not the current 5% GST rate that applies to most goods and services in BC). Zero-rated supplies include basic groceries, prescription drugs, medical devices and some exports. A business can claim an input tax credit (ITC) for the GST paid on expenses related to providing zero-rated supplies.
An “exempt supply” means GST does not apply to the sale, therefore the business cannot claim an ITC for the expenses incurred in providing that good or service. Examples of exempt supplies include residential rents, most medical and dental services, most educational services and most services provided by financial institutions. If a business provides only exempt supplies it cannot register for GST.
