If you’re starting a business in Canada or expanding your operations, understanding how to open a GST account is essential. The Goods and Services Tax (GST) is a federal tax that applies to most goods and services sold in Canada. Registering for a GST account is not just a legal requirement for many businesses—it’s also a critical step in building trust with your customers and ensuring compliance with the Canada Revenue Agency (CRA).
In this comprehensive guide, you’ll learn everything you need to know about opening a GST account, including who needs to register, the step-by-step registration process, common mistakes to avoid, and tips to manage your GST obligations effectively. Whether you’re a sole proprietor, a small business owner, or a growing corporation, this resource will help you navigate GST registration with confidence
What is GST and Why Does it Matter?
The Goods and Services Tax (GST) is a 5% federal tax levied on most goods and services sold in Canada. Some provinces combine GST with their provincial sales tax to create the Harmonized Sales Tax (HST).
GST is a key part of Canada’s tax system, ensuring that the government can fund essential services while maintaining a fair and transparent marketplace. For businesses, GST registration is often mandatory once certain revenue thresholds are met. It also allows you to claim input tax credits (ITCs) on business expenses, reducing your overall tax burden.
Who Needs to Open a GST Account?
You are generally required to register for a GST account if you meet the following criteria:
- You make taxable sales, leases, or other supplies in Canada.
- Your total taxable revenues (before expenses) exceed $30,000 over four consecutive calendar quarters.
- You are not a small supplier (more on this below).
Small Supplier Exception
If your business earns $30,000 or less in gross revenue over four consecutive quarters, you are considered a “small supplier” and are not required to register. However, voluntary registration is possible and sometimes beneficial.
Mandatory Registration
Certain businesses must register for GST regardless of income, such as taxi and limousine operators and non-resident businesses carrying on business in Canada.
Benefits of Registering for GST
- Legal Compliance: Avoid penalties and interest charges from the CRA.
- Input Tax Credits: Claim GST paid on business purchases, reducing your net tax liability.
- Business Credibility: Customers and partners may view your business as more legitimate.
- Growth Readiness: Prepare your business for expansion and larger contracts.
When Should You Register for GST?
You must register for GST within 29 days of exceeding the $30,000 threshold. If you anticipate rapid growth, consider registering early to avoid compliance gaps and to start claiming input tax credits sooner.
Documents and Information Required
Before you begin, gather the following information:
- Legal business name and operating name
- Business number (BN), if you already have one
- Business structure (sole proprietorship, partnership, corporation, etc.)
- Physical and mailing address
- Contact information
- Description of business activities
- Estimated annual sales
- Date your business became a GST registrant
- Social Insurance Number (SIN) for sole proprietors or partners
- Incorporation documents (for corporations)
Having these details ready will streamline the registration process.
Step-by-Step Guide to Opening a GST Account
1. Determine Your Eligibility
Review your business revenues and activities. If you exceed the small supplier threshold or fall under a mandatory registration category, proceed to registration.
2. Obtain a Business Number (BN)
If you don’t already have a Business Number, you’ll need to get one. The BN is a unique identifier for your business with the CRA. You can register for a BN and GST account at the same time.
3. Choose Your Registration Method
You can register for a GST account online, by phone, by mail, or in person.
Online Registration Process
Registering online is the fastest and most convenient option.
How to Register Online
- Visit the CRA’s Business Registration Online (BRO) portal.
- Log in or create an account.
- Select “Register for a new program account.”
- Choose “GST/HST” from the list of available program accounts.
- Enter your business information as prompted.
- Review and confirm your details.
- Submit your application.
You’ll receive your GST account number immediately upon successful registration.
Registering by Phone, Mail, or In-Person
By Phone
Call the CRA’s Business Enquiries line at 1-800-959-5525. Have your business information ready.
By Mail or Fax
Download Form RC1, “Request for a Business Number (BN),” from the CRA website. Complete the form and mail or fax it to your local tax services office.
In-Person
Visit a CRA tax services office with your completed RC1 form and required documents.
What Happens After You Register?
- GST Account Number: You’ll receive a 15-character GST account number (e.g., 123456789 RT0001).
- Effective Date: The date you become liable to collect GST is typically the date you exceed the $30,000 threshold or the date you voluntarily register.
- Collecting GST: You must charge GST on all taxable goods and services from the effective date forward.
- Filing Frequency: The CRA will assign a filing frequency (monthly, quarterly, or annually) based on your sales volume.
- Input Tax Credits: You can start claiming ITCs for GST paid on eligible business expenses.
Managing Your GST Account: Filing and Payments
Filing GST Returns
You must file GST returns according to your assigned frequency. Returns can be filed online through the CRA’s My Business Account portal, by mail, or through authorized third-party software.
Payment Deadlines
GST payments are due at the same time as your return. Late payments may incur penalties and interest.
Keeping Records
Maintain detailed records of all sales, purchases, and GST collected and paid. Good recordkeeping is essential for compliance and for substantiating input tax credit claims.
Common Mistakes and How to Avoid Them
- Missing the Registration Deadline: Register within 29 days of exceeding the threshold to avoid penalties.
- Incorrect Information: Double-check your business details to prevent delays.
- Failing to Collect GST: Once registered, you must charge GST on all taxable sales.
- Late Filing or Payment: Set reminders for filing and payment deadlines.
- Poor Recordkeeping: Keep all invoices, receipts, and records for at least six years.
Frequently Asked Questions
What if I operate in multiple provinces?
If you sell in provinces with HST (e.g., Ontario, Nova Scotia), your GST account will also cover HST collection. The registration process is the same.
Can I register voluntarily if I’m a small supplier?
Yes. Voluntary registration allows you to claim input tax credits and may be beneficial if you have significant business expenses.
What if I stop doing business?
You must close your GST account with the CRA. File a final return and remit any outstanding GST.
Do non-residents need to register?
Non-resident businesses carrying on business in Canada must register for GST if they make taxable supplies in Canada.
Expert Tips for Smooth GST Compliance
- Automate Your Accounting: Use accounting software to track GST collected and paid, generate invoices, and file returns.
- Consult a Professional: If your business is complex, consider working with a tax accountant or GST consultant.
- Stay Informed: Tax laws and thresholds can change. Subscribe to CRA updates or consult their website regularly.
- Separate Business and Personal Finances: Maintain a dedicated business bank account to simplify GST tracking.
- Review Input Tax Credits: Only claim ITCs for eligible business expenses. Keep receipts and documentation.
Conclusion
Opening a GST account is a foundational step for any Canadian business. It ensures you meet legal obligations, positions your business for growth, and enables you to recover GST paid on expenses. By following the steps outlined in this guide, you can register quickly and confidently, avoid common pitfalls, and set your business up for long-term success.
If you’re ready to open your GST account or have questions about your specific situation, visit the CRA’s Business Registration Online portal or consult a qualified tax professional.
