Understanding the Quick Method of GST/HST Filing

1. Introduction to HST Quick Method: The HST Quick Method is an accounting approach sanctioned by the Canada Revenue Agency (CRA) to assist small businesses in determining their net tax for GST/HST. When employing this method, businesses continue to levy the relevant GST/HST on their taxable goods and services. However, the GST/HST payable is computed by multiplying the revenue from taxable supplies (inclusive of GST/HST) for the reporting period by the quick method remittance rate suitable for the business. These remittance rates are typically lower than the GST/HST rates charged, allowing businesses to remit only a portion of the collected tax. Consequently, businesses don’t claim the input tax credit on their acquisitions, leading to substantial annual savings for many.
2. Advantages of the Quick Method:
- Simplifies the process of calculating GST/HST remittances and filing returns by eliminating the need to record and report the actual GST/HST paid or payable on most purchases.
- Often results in reduced GST/HST payable due to the lower remittance rates compared to the actual GST/HST collected.
- Businesses can avail a 1% credit on the initial $30,000 of revenue (inclusive of GST/HST) earned each fiscal year.
- Reduces the likelihood of CRA audits due to its calculation method based on a predefined rate.
1. Quick Method Remittance Rates: Different rates apply to businesses that sell goods (raw materials) and those offering only services. These rates vary based on the GST/HST rate applicable in different provinces. For instance, in Ontario, the rate is 8.8% for service-based businesses and 4.4% for goods-resale businesses.
2. Eligibility Criteria: To opt for the quick method, businesses must:
- Have been operational continuously for the 365 days preceding their current reporting period.
- Not have revoked an election of the quick method or the simplified method for claiming ITCs during the past 365 days.
- Not belong to a category of businesses specifically ineligible for this method.
- Ensure their annual worldwide taxable supplies revenue (including zero-rated supplies) and that of their associates doesn’t exceed $400,000 for specific periods.
- Have a permanent establishment in Canada.
1. Ineligible Businesses: Certain businesses cannot use the quick method. These include:
- Accounting, bookkeeping, actuarial, financial consulting, tax consulting, or tax return preparation service providers.
- Listed financial institutions.
- Charities, public institutions, municipalities, or designated local authorities.
- Some non-profit organizations.
- Public colleges, school authorities, universities operating non-profitably.
- Hospital authorities, facility operators, or external suppliers.
1. Electing the Quick Method: Businesses can elect to use the quick method through CRA’s online services or by completing Form GST74. The timing of the election varies based on the GST/HST return filing frequency.
2. Claiming Input Tax Credits: With the quick method, businesses don’t claim ITC on purchases. However, ITCs can be claimed for specific items like real property purchases, capital property, and purchases made before the quick method election.
3. Supplies Ineligible for Quick Method Calculation: Certain supplies are not eligible for the quick method, such as zero-rated supplies, sales of real property, supplies made to employees or shareholders for taxable benefits, and supplies appropriated for personal benefits.