2 Simple Ways to Learn Exempt supplies from GST/HST:

by | Jun 3, 2022

We all know running a business in Mississauga is hard work. You have to create workable schedules, manage taxes and juggle personal obligations.

You can also exempt supplies from paying the GST/HST. Your eligibility depends on whether you meet specific requirements or not. So, Yogi & Associates will make sure everything is in order. Also, keep your bookkeeping records up to date. This helps figure out which products are exempt from charging GST and HST. We can also provide our bookkeeping services to you if you need them.

1. What is GST?

Most products and services purchased in Canada are subject to the GST. It is a consumption tax. Businesses must report the GST on their product to the Canada Revenue Agency. Consumers pay the GST to the companies. The amount of GST charged varies according to the HST or PST rate.

2. What is HST?

The HST is a single tax imposed on Canadians who sell goods and services in Canada. It relates to both consumers and companies. HST helps to maintain the local market by protecting stores and economic growth.

HST is now implemented in five Canadian provinces:

New Brunswick 15%
Newfoundland and Labrador 15%
Nova Scotia 15%
Prince Edward Island 15%
Ontario 13%

3. Which Products and Services are Taxable?

When you start a business in Canada, you need to be familiar with the distinction between goods and services that are taxable or non-taxable. Goods that fall under this category include foodstuffs, software, and textbooks. 

4. Free Guide on Exempt Supplies from GST/HST in Canada:

There are two types of exempt supplies: exempt and zero-rated.

1. Zero-rated Products and Services:

The CRA imposes Zero-rated tax on generally taxable items. But they charge ZERO rates, although you can still claim the input tax credits. So, here is the list of zero-rated supplies:

  • Farming equipment, such as tractors, equipment, and machinery, is also zero-rated.
  • Medicines/Pharmaceuticals: prescribed medicines or drugs.
  • Some medical devices, such as artificial teeth, hearing aids, wheelchairs, canes, vehicle adaptations, accommodate a disable. Insulin pumps, syringes, and pens, as well as urinary catheters, are also featured.
  • Tampons, sanitary napkins, and other feminine hygiene goods are also included in zero-rated products.
  • Products from the fishing industry.
  • Farm livestock is sold for human use. But not for pet or reproduction purposes, such as dogs, cats, or horses, will not be labeled as zero-rated.
  • Basic Grocery includes meat, dairy, vegetables, tea, and coffee. But excludes snacks, soda, booze, and candy.

2. Exempt Products and Services:

This is a different category of exempt supply where all the items are free of tax. You cannot claim input tax on exempt supplies. Thus, you cannot register for GST/HST if your company only produces exempt supplies.

Here are the examples of exempt supplies:

  • Used residential house for sale.
  • Most of the health care and medical facilities.
  • Child care services, which includes children less than 14 age.
  • Many educational services
  • Music lessons
  • Charities, governments, non-profit organizations, towns, and other public service providers offer some properties.

Note:

There is a slight distinction between zero-rated and exempt products and services. You can claim input tax credits in zero-rated. However, while in exempt products, you cannot claim input tax credits.

5. Being a Small Supplier:

If you run a business on a small scale, then the CRA will not consider you a large supplier. So you won’t have to pay taxes. For example, if your company does 30,000 or less per calendar year, then CRA won’t charge GST/HST. You also cannot collect tax from the customers when they buy these goods or services.

You can click if you want to learn how to return GST/HST. Why is it essential to return GST/HST? to read.

6. How to Keep Bookkeeping Records of your Taxes?

You can use our bookkeeping or payroll services to keep a record of your GST/HST collections. But, if you like handling your own business’s bookkeeping or payroll finances, all you need to take care of is the following:

  • Information on your GST/HST collections.
  • Information on your GST/HST payments.
  • Separate statement of your GST and HST collections and payments.

“If you show people the problems and you show people the solutions, they will be moved to act.” Bill gates

Final words!

The GST/HST applies to almost every product and service purchased in Mississauga. But you have to understand the exempt supplies and taxable supplies. Moreover, you need to make sure that your business is not running at a loss due to sales tax payments. So, feel free to contact Yogi & Associates. You can also get our bookkeeping services if you want.

Contact Yogi & Associates!