Small Business Week BC: The ALA Guide to GST for Small Business Owners
In the spirit of Small Business Week BC, the team at Akeroyd Leung Amlani is celebrating local entrepreneurs and small business owners by providing the 411 on GST.
The process of charging and collecting sales tax differs from province to province. In British Columbia, a 5% Federal Goods and Services Tax is placed on most goods and services, an implementation designed to make the tax system more streamlined. While GST is charged on almost everything, many small to medium enterprise owners assume, due to the size of their company or the service they are providing, they are exempt from the rules of GST. However, what many business owners don’t realize is that if, in four consecutive quarters, a business incurs sales of over $30,000 on goods and services which are not GST exempt*, the business is no longer considered a ‘small supplier’ and must become a GST-registrant.
It is important to note; GST Registration should take place within 29 days of exceeding the small supplier threshold. This is vital for the smooth sailing of any small business.
“I think a big thing to be aware of is understanding if your business is required to collect and remit GST, whether it be voluntary or involuntary,” explains Jamie, Manager at Akeroyd Leung Amlani. “There are several benefits to voluntarily registering for GST even if your business is a small supplier unlikely to exceed the $30,000 threshold,” the seasoned tax specialist insists. Regardless of the business, GST is paid on taxable goods and services needed for day-to-day commercial use. Once GST registered, the business can claim some of this tax back through Input Tax Credits (ITCs).
Being able to identify which supplies are taxable and at which rate is another crucial aspect of understanding GST. Put simply, there are three main types of supplies and each varies in their taxability. The first type is Exempt Supplies, and, as the name suggests, this group is entirely exempt from GST. Vendors providing exempt supplies should not charge GST and, generally, cannot claim ITCs to recover GST paid on property and services utilized when providing these supplies.
The next category, Zero Rated Supplies, have a 0% GST rate applied to them. Although vendor do not collect GST on zero-rated supplies, the business owner may still be eligible to claim ITCs to recover GST paid on property and services acquired in the process.
The final tax status group is Taxable Supplies, the most common of the three. As per the Canada Revenue Agency – “Most property and services supplied in or imported to Canada are subject to GST, which is applied to these supplies at the rate of the province.” As a result, GST registrants providing Taxable Supplies can charge GST on sales and are also eligible to claim ITCs.
As residents of British Columbia, we all encounter GST on a daily basis but this does not necessarily make it any easier to understand. For this reason, we are proud to provide advice and guidance for new and existing clients and small business owners alike.
To learn more about GST or to speak directly with one of the Akeroyd Leung Amlani Chartered Professional Accountants, please feel free to reach out to us for a consultation. April, our Office Coordinator, can be reached at firstname.lastname@example.org or 604-259-2441. Connect with us on LinkedIn today!
More information on GST can be found here: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/register-a-gst-hst-account.html
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