Did you know there are multiple ways a small business can file its GST/HST? Choosing the right method for your business can help save you money on your next filing. Let’s walk through each method so you can choose the best one for your business.

Option #1 : Regular Method

This is the default option for filing your GST/HST. The Regular Method relies on your reporting actual GST/HST collected and actual GST/HST spent on purchases.

You do not pay income tax on the GST/HST you collected and cannot claim GST/HST paid on purchases as a deduction to income tax.

Instead, GST/HST collected is payable 100% to the government!

BUT the GST/HST you pay on purchases is deducted from the collected amount at 100% (called Input Tax Credits or ITCs), so most people don’t pay all the GST/HST they collect.

If you have exempt supplies, you can only claim ITCs under the regular method to the extent that you have taxable or zero-rated supplies.

If your sales are 80% exempt and only 20% taxable, you can only claim 20% of the GST/HST paid on purchases
This is THE MOST audited issue with GST/HST returns, so make sure to track your sales by taxable, zero-rated and exempt.

Option #2: Quick Method

The quick method is another option available to help small businesses calculate their net tax for GST/HST purposes.

This method is easier to calculate because it removes the need to report the actual GST/HST paid or payable on most purchases.

Instead, GST/HST payable is based on a rate multiplied by your taxable sales.

When you use the quick method, you still charge the GST/HST at the applicable rate on your taxable supplies based on the province of your purchaser discussed previously.

To calculate the amount of GST/HST to remit to CRA, multiply the revenue from your supplies (including the GST/HST) for the reporting period by the quick method remittance rate, or rates, that apply to your situation.

Generally speaking, if you don’t have a lot of expenses, or your expenses don’t have GST/HST paid on them, you can save money because the remittance rate is lower than the rate for GST/HST collected.

The difference between your GST/HST collected and GST/HST remittance rate is added to your taxable income - so you pay slightly more income tax but much less on your GST/HST return!

Option #3: Simplified Method

The simplified method for claiming ITCs is another way to calculate ITCs when completing your GST/HST return using the regular method of filing.

You do not have to file any forms to use it; however, you must use it for at least one year once you decide to use this method.

The simplified method eliminates the need to show GST/HST paid in your records separately.

You only need the total amount of the taxable purchases to claim an ITC and apply a factor.

Use This To Save Money

If you have many purchases that qualify as ITCs, it may be better to report under the regular method. This is because you will have a lot of credits that you can use to deduct your GST/HST payable. This also applies to zero-rated supplies since you do not collect any GST/HST on them but can claim ITCs... you may even get a refund!

The quick method is generally the best if you have minimal expenses. You pay only a portion of the GST/HST that you collect, which may be less than if you pay your actual amount collected less ITCs. You should check your provincial remittance rate each year to see how much you would remit under the quick vs. regular methods.

Generally, the simplified method has the highest tax payable. This method is really a trade-off between putting in the effort to track your GST/HST and paying a bit more in sales tax to CRA.