Why You Need a GST Account Immediately.
Most of the time when a person starts a business, the start-up phase of the business is very expensive and this is when much more money is spent as opposed to when the business is up and running. Most businesses require equipment to operate. This equipment is usually purchased at the start-up of the business so in most cases at this time the business spends much more money than it brings in through sales. For this reason, it is important to open a GST account before these purchases are made. I should note that the information in this article pertains both to incorporated businesses and unincorporated businesses.
Having a GST account will allow your business to claim back the GST it paid on its purchases. Since sales are usually lower in the initial start-up phase of a business, it’s likely you will receive a GST refund (GST refunds or balances owing are calculated as the GST you collected on sales less any GST paid on purchases, if you paid more GST than you collected then you get a refund).
Opening up a GST account for a business is relatively easy. You can do it over the phone with Canada Revenue Agency (CRA) at 1-800-959-8281. All they need is to verify your identity and then you can request the GST account over the phone. They will determine or ask for an effective date. The effective date is the date you can start claiming GST on purchases and charging GST on your sales. It is important that the effective date is before your purchases, or you will not be able to claim back the GST paid on the purchases.
Not opening up a GST account is often overlooked when a business is first started and being able to claim back the GST paid on all the purchases made in the start-up phase is lost. It is nice when a business first starts to receive a refund cheque in the mail rather than a bill for money that would need to be paid out!
Contact us to learn more about the importance of a GST account.