Managing Goods and Services Tax (GST) and the Harmonized Sales Tax (HST) payments is a crucial aspect of running your business in Canada.
GST/HST is a consumption tax that businesses in Canada are required to collect and remit to the Canada Revenue Agency (CRA). In this blog post, we will explore what GST/HST is, why it’s important to pay on time, the payment deadlines, various payment methods, and tips to ensure timely payments. This information is particularly valuable for medium-sized business owners looking for bookkeeping services to stay compliant and avoid penalties.
What Is GST/HST?
GST, also known as the Goods and Services Tax, is a federal tax applicable to most goods and services in Canada. HST, on the other hand, is the Harmonized Sales Tax, which combines the federal GST with a provincial sales tax in certain provinces. Understanding the GST/HST system is crucial for businesses as they are responsible for collecting this tax from their customers and remitting it to the CRA.
Medium-sized businesses need to be aware of the threshold for GST/HST registration, which is currently set at $30,000 in annual revenue. Once your business reaches this threshold, you must register for a GST/HST account and start collecting and remitting the tax.
Why Is It Important To Pay GST/HST On Time?
Paying GST/HST on time is a legal obligation for your businesses in Canada. Failure to do so can result in severe consequences, including penalties and interest charges. You need to understand the importance of complying with these obligations to avoid potential financial setbacks. Here are 2 reasons why it’s important to pay GST/HST on time:
Legal Obligations
If your business collects GST/HST you are essentially acting as an intermediary for the government, as you collect the tax on behalf of the CRA. Failing to remit these funds is considered a breach of trust with the government.
Potential Penalties And Interest For Late Payments
Late or incomplete GST/HST payments can lead your business to penalties and interest charges. These penalties are not to be taken lightly; they can be substantial and escalate rapidly based on the severity and recurrence of non-compliance. Penalties are usually calculated as a percentage of the unpaid amount, and they can quickly eat into your finances.
In addition to penalties, late GST/HST payments trigger interest charges on the outstanding balance. The CRA applies interest over time, and it compounds, meaning that the longer you delay payment, the more interest you will owe. This interest expense can significantly add to your financial burden, making it progressively more challenging to settle your GST/HST obligations.
GST/HST Payment Deadlines
The payment schedule for GST/HST is based on filing periods, which can be monthly, quarterly, or annually. Businesses can have a year-end of December 31st or a custom year-end. Understanding your filing period is crucial for meeting payment deadlines. Here’s a breakdown:
- Monthly: Payments are due by the end of the month following the reporting period.
- Quarterly: Payments are due by the end of the month following the end of each quarter.
- Annually (December 31st year-end): Payments are due by the end of the month following the end of your fiscal year.
For businesses with a custom year-end, the payment deadline is generally three months after the end of the fiscal year.
Methods to Pay GST/HST
To ensure your GST/HST payments are made on time, the CRA provides several convenient payment methods:
Online Payments
CRA’s My Payment Electronic Service
The CRA’s My Payment electronic service is a convenient way to make online GST/HST payments. Here’s a step-by-step guide to help you navigate this service:
- Access the My Payment Service: Visit the CRA’s official website and locate the My Payment service.
- Select Payment Type: Choose the “Goods and Services Tax/Harmonized Sales Tax (GST/HST)” option as your payment type.
- Provide Payment Information: You’ll be prompted to enter your business and payment information, including your Business Number (BN) and the period for which you are making the payment.
- Select Your Bank: Choose your financial institution from the list of participating banks and credit unions.
- Confirm and Submit: Review all the information you’ve entered to ensure accuracy. Once verified, submit your payment.
- Receive Confirmation: After your payment is processed, you’ll receive a confirmation receipt. It’s a good practice to save or print this receipt for your records.
- Keep Records: As part of your financial records, maintain a record of this payment, including the payment date and confirmation receipt.
Online Banking Services
Online payments for GST/HST are another convenient payment option for your businesses. You can follow the steps provided by your bank institution. Online payments help streamline the process, offering you ease, accuracy, and documentation for your GST/HST obligations.
Phone Payments
If you value a personal touch when managing your tax obligations, telephone banking services provided by your bank or credit union can be an excellent option. This method allows you to interact with a live representative over the phone, guiding you through the payment process step by step. It’s a convenient choice for those who prefer a more human interaction while ensuring their GST/HST payments are handled accurately and securely.
Pre-Authorization
This method offers the convenience of automated payments, making sure your tax obligations are consistently met on time without manual intervention, making it easier to stay compliant with GST/HST payment deadlines.
Mail Payments
There are businesses that prefer to mail their GST/HST payments to the CRA. This is suitable if you opt for the traditional approach of sending payments by postal mail, ensuring you can fulfill your tax obligations securely and accurately through this method.
Using GST/HST Netfile
For businesses seeking a streamlined and efficient method for filing their GST/HST returns, GST/HST Netfile is an invaluable tool. This electronic filing system not only simplifies the process but also offers several key advantages, including faster processing and confirmation of receipt.
What Is GST/HST Netfile?
GST/HST Netfile is an electronic filing service provided by the CRA that allows businesses to submit their GST/HST returns digitally. It’s designed to simplify the tax reporting process, providing a convenient and paperless way to fulfill your tax obligations. With GST/HST Netfile, you can securely transmit your return information to the CRA, eliminating the need for traditional paper submissions.
How To File GST/HST Returns Through Netfile
Now, let’s walk through the steps of using GST/HST Netfile to submit your returns:
Step 1: Gather Your Information
Before starting the filing process, ensure you have all the necessary information at hand. This includes your Business Number (BN), reporting period, and accurate financial data for your GST/HST return.
Step 2: Access the CRA’s Netfile Portal
Visit the Canada Revenue Agency’s official website and locate the Netfile portal. You may need to create or log in to your CRA My Business Account.
Step 3: Select the Appropriate GST/HST Return
Choose the specific GST/HST return that corresponds to your reporting period. Ensure you select the correct return to match your business’s tax obligations.
Step 4: Enter Your Business Information
Provide your Business Number (BN) and other required identifying details to initiate the filing process.
Step 5: Complete the Return Form
Carefully fill out the GST/HST return form, including all relevant financial data and information about your business transactions during the reporting period.
Step 6: Review and Verify
Thoroughly review your completed return for accuracy and completeness. Make any necessary corrections or adjustments.
Step 7: Electronically Sign and Submit
Once you are confident in the accuracy of your return, electronically sign and submit it through the Netfile portal. This securely transmits your return to the CRA.
Step 8: Receive Confirmation
After successful submission, you will receive an immediate confirmation of receipt from the CRA. This confirmation serves as proof that your return has been received.
Tips To Ensure Timely GST/HST Payments
To protect your business from late payments and penalties associated with GST/HST, consider implementing the following practical strategies:
Set Reminders: Use calendars or accounting software to set reminders for GST/HST payment deadlines.
Keep Records: Maintain accurate records of all transactions and payments related to GST/HST.
Consider Professional Help: Hiring expert bookkeeping services like Ruby Business Solutions can help streamline your GST/HST management and ensure compliance.
Understanding and managing GST/HST filling is essential for businesses in Canada. Compliance with GST/HST regulations not only avoids penalties but also contributes to the smooth operation of your business. If you need expert assistance with bookkeeping and ensuring timely GST/HST payments, don’t hesitate to reach out to us. Stay compliant, avoid penalties, and keep your business on the right financial track.
