Did you know that there are three categories of GST/HST?

When GST/HST is charged on goods or services, it’s called ‘Taxable Supplies.’ There are also two categories of non-taxable items for GST/HST. Both of which are charged no GST/HST, but there are different requirements and benefits for each type that are important to know.

Taxable Supplies

On the sale of goods, you collect GST/HST if you sell goods and deliver or make them available to the customer in a participating province.

On the sale of a service, you collect GST/HST based on the address and province of the person purchasing the service. If you do not collect the purchaser’s address, you collect the GST/HST for your province.

Supplies are considered taxable for GST/HST if they do not fit into the zero-rated or exempt categories outlined below.

Taxable supplies add or have included GST/HST into their sales price.
You collect GST/HST based on your provincial rates.
There are special considerations for selling a service or product outside your province (think online course, group program, or webinar!)

Zero-rated Supplies

Some supplies are zero-rated under the GST/HST, where GST/HST applies at a rate of 0%. This means that you do not charge GST/HST on these supplies.

You may be eligible to claim input tax credits (ITCs) for the GST/HST paid or payable on property and services acquired on zero-rated supplies.

Examples of supplies taxable at 0% (zero-rated) are:

basic groceries such as milk, bread, and vegetables;
prescription drugs and drug-dispensing services;
specific medical devices such as hearing aids and artificial teeth;
supplies that are exported;
- hint, if your online program is sold outside of Canada, it may be zero-rated.

If you are exporting goods outside Canada or providing services to non-residents, these are considered zero-rated even if the goods or services would typically be charged GST/HST if sold within Canada!

Exempt Supplies

Some supplies are exempt from GST/HST where no GST/HST applies. This means that you do not charge the GST/HST on these supplies of property and services, and you are generally not entitled to ITCs on property and services acquired to provide these supplies.

You cannot register for the GST/HST if your business provides only exempt supplies.

Examples of exempt supplies are:

most health, medical, and dental services are performed by licensed physicians or dentists for medical reasons;
many educational services;
financial services such as fees for bank accounts and lending; and
residential condominium fees.

The caveat for health services is that the services must be provided to an individual by a practitioner or are provided under a health care insurance plan. If you create an online course or group program, they are taxable supplies.

If you only have exempt supplies, you cannot register for GST/HST since you do not collect and do not get to claim sales tax paid on your return.

Having multiple types of GST/HST

You may be in a situation where your business has multiple types of GST/HST.

If this is the case, make sure you charge the correct amount of GST/HST to patients.
If you are already registered for GST/HST and host a group webinar, you must charge sales tax.
However, if you are not registered and host the same webinar and are not close to the $30,000 registration threshold, you do not need to charge GST/HST.

Since you cannot claim ITCs on exempt supplies, make sure that you only claim ITCs to the extent that you have taxable and zero-rated supply sales.

if your business earns 75% of its income from exempt sales, you can only claim 25% of your ITC's
this 75% that you cannot claim on your GST/HST return will be written off on your tax return

Go through your GST/HST filing in detail to make sure you’ve filed each category correctly before the due date at the end of the month!

RESOURCES:

Want to learn more about GST/HST? Business Foundations: GST/HST Webinar is now available! Click HERE to register.

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