In Canada, GST & HST are consumption taxes that apply to the sale of most goods and services.
There are 3 different types of supply in Canada.
Exempt Supply
0 Rated Supply
Taxable Supply
Which type of service / goods you supply will determine whether you charge GSTor not and can claim GST or not.
#1) Exempt Supply
I think this is self explanatory, the type of service / good you provide is completely exempt from GST, therefore you NEITHER collect or claim GST, clear as mud?
Example would be music lessons are exempt supply
A music teacher would not charge gst and cannot claim gst on the business expenses.
Most medical services performed by doctors and dentists are exempt supplies.
I’ll put a link to CRA website where you can reference a list of exempt supply
If your business only provides exempt supplies, you do not need to register for a GST account
#2) 0 RATED Supply
This one is tricky, and is Different from EXEMPT supply. A Zero rated supply means the business does charges GST, but at 0%. So essentially does not collect GST. Where this is different from EXEMPT Supply, is that the business CAN claim GST on business expenses
An example of 0 rated supply would be the supply of basic groceries.
So a grocery store, would technically collect GST on basic groceries, but would be able to still claim GST on business expenses
0 rated supply also applies to taxable supplies that are EXPORTED.
For example, if you sold merchandise / services to someone in the US.
So make sure if you are a provider of 0 rated supply, register for a GST account so that you can claim back the GST paid on business expenses!!!!
Finally, #3) Taxable Supplies
This would be any other supply that is not exempt or 0 rated, and thus GST is charged collected, and GST can be claimed on business expenses.
An example of taxable supply would be hey, my accounting services.
I charge GST to my customers, and claim GST on my business expenses. Easy peasy
Now if my sales were less than $30K I can be exempt from registration, but I wouldn’t be able to claim the GST on my business expenses. So decipher for yourself whether you want to voluntary register early, or wait until you reach $30K. Most startups spend a lot in the beginning, so its not a bad idea to register early
Again, I’ll provide a link below with reference to CRA website where you can dig in more details.
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