Gst quick Reference

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GST Quick Reference
The GST is a value-added tax in which each stage of the production/distribution system is assessed. It is not a retail tax or a one incident tax that is charged to a consumer when a sale is made. GST is a business transfer tax that flows through the businesses to the consumer.

Most goods imported into Canada are subject to the Goods and Service Tax (GST) or the Harmonized Sales Tax (HST).

The GST was implemented in Canada on January 1, 1991. Most Canadian businesses and Non-Resident Importers are registered with the Canadian government to collect the GST/HST.

A Non-Resident Importer (NRI) is a company who in most cases does not have a physical presence in Canada, yet for purposes of customs and GST, acts as the importer of record for goods sold/consigned into Canada. As an NRI, you will relieve your Canadian customers of the responsibilities of importation, making it easier for them to buy from you.

GST is applied at the border or at the final port of entry to all imported Commercial goods destined or supplied to all provinces within Canada.

Registered firms collect the GST on the sale in Canada of taxable goods and services supplied to all provinces with the exception of New Brunswick, Nova Scotia or Newfoundland at a rate of 5%.

Registered firms collect the HST on the sale in Canada of taxable goods and services supplied and destined to New Brunswick, Nova Scotia and Newfoundland at a rate of 13%.

At times a company may find itself in the desirable position to collect a refund. This happens when a company pays more GST that it collects. As the Importer of Record, you will be responsible for payment of the GST on any taxable commercial goods entering Canada. Your option is to register or not to register.

(Gst collected on Invoice) – (Gst Paid on Entry) = Gst Remitted to Canada Revenue Agency (CRA)

You must pay 5% GST on taxable goods at time of import. The Flow through Method of GST recovery must be used by your firm to pass on the GST paid at the time of import. A Registered Canadian customer can take advantage of the GST paid by you and use it as their Input Tax Credit (ITC).

Commercial Invoice Non-Registrant includes GST in their Selling Price to Canadian customers. A Non-Registrant is not legally allowed to collect GST from their Canadian customer; therefore, GST should be included in the Selling Price as a Cost. GST must not be indicated as a separate line item on the Commercial Invoice.

Canada Customs Invoice Non-Registrant declares the same Selling price (GST included) as indicated on their commercial invoice; however, in field 9 of the Canada Customs Invoice, Conditions of Sale, it must state “Selling Price includes GST”.

GST is paid on goods entering Canada at time of import; GST is calculated on the Duty Paid Value of the goods.

Non-Registrant must supply Canadian customer with a copy of their B3 (Canadian Import Entry) to substantiate the GST paid status of the goods purchased.

Should you choose not to register, then a copy of the Canada Customs entry evidencing the amount of GST paid must support your invoice to your client so that they may benefit from the Import Tax Credit (ITC). It is important to ensure that your Canadian customers understand and accept the flow through Method of claiming an Input Tax Credit. It is also important to ensure that the tax you pass on will match the amount paid at the border.

While the Non-resident Importer program is very attractive, NRIs must be aware of the following:

The Business Number (BN) is a nine digit registered serial number assigned to all commercial concerns in Canada. In order to import commercially into Canada a company must have a BN. The BN also serves as the GST registration number for firms whose sales exceed $30,000 CAD. Your first step in becoming and NRI is applying for the BN, secondly request an Importer Number. After the BN, an RT extension is added for GST and an RM is added for the Importer number. (i.e. 123456789RM0001)

Canadian law requires all commercial records and documentation, to be kept for 6 years. The Canada Revenue Agency may authorize certain importers to maintain records outside Canada provided they submit a letter of undertaking. The purpose of this document is to record and set out the agreement made between the company and the Canada Revenue Agency, concerning the availability of records for Customs audit purposes.

As the importer of record into Canada you must give special consideration to the various Customs regulations and import provisions that could affect your business, such as the valuation of your goods. The importer (you) assumes full responsibility for the correct declaration and calculation of the value in accordance with the Customs Act. Failure to comply with these requirements or with the other programs could result in reassessments by the Canada Border Services Agency (CBSA) for additional duties, interest and penalties. Customs Brokers like Accountants, work with the information you provide, YOU are ultimately responsible for the accuracy.
If you choose to do business in Canada as a Non-Resident Importer we recommend that you utilize the Flow-Through method of recovering applicable GST.
Flow-through of ITCs

If you import goods into Canada and you are not a GST/HST registrant, you cannot claim an ITC for the GST or the federal part of the HST in respect of the importation. However, if you sell the imported goods to a GST/HST registrant, that registrant may be able to claim the GST or the federal part of the HST you paid at the time of import as an ITC. As long as you give the registrant satisfactory proof that you paid the GST or the federal part of the HST when you imported the goods, you can pass on the ITC to that registrant. Satisfactory proof includes a copy of Canada Border Services Agency (CBSA) Form B3-3, Canada Customs Coding Form, showing that the GST or the federal part of the

HST was paid at the time of import. You may also need the sales invoice, an agreement in writing between you and the buyer, or other relevant documents showing:

■ that the goods were delivered, or made available to the registrant in Canada without being used by you in Canada; and

■ the quantity of goods bought.

If you distribute products to more than one registered customer who is a Canadian resident, CBSA Form B3-3 alone may not provide enough information to support an ITC claim by your customers. For example, there may not be a CBSA Form B3-3 for each transaction. If this is the case, your customers must get a statement from you indicating the amount of tax paid or payable on the goods delivered to them. Each declaration must be accompanied by the corresponding CBSA Form B3-3 transaction number. You can also pass on an ITC to a registrant if the registrant takes physical possession of the imported goods for the purpose of supplying commercial services, including:

■ Manufacturing;

■ testing;

■ processing, which includes marginal manufacturing such as packaging, repackaging, finishing, and cutting to size;

■ Evaluation;

■ inspecting; and

■ Repair or maintenance

You have to give the registrant satisfactory proof that you paid the GST or the federal part of the HST when you imported the goods.


Certain public service bodies may also claim a rebate to recover part of the tax paid. For more information, see Guide RC4034, GST/HST Public Service Bodies’ Rebate.

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