GST Payments, Refunds & What You Need to Know

Ever wondered why the price tag on your groceries sometimes includes an extra tax? That’s likely the Goods and Services Tax (GST) at play. This guide will help you understand the basics of GST payments and refunds, whether you’re a business owner in India or Canada, or simply a curious consumer.

What is GST?

Think of GST as a tax applied to most goods and services bought and sold within a country. In simpler terms, whenever you purchase something taxable, a small portion of the price goes towards the government. Businesses that sell these taxable goods and services are responsible for collecting and paying this tax to the government.

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Understanding GST in India

Indian businesses have a slightly more complex system compared to Canada. Here, the GST is divided into three categories depending on the location of the seller and buyer:

  • IGST (Integrated GST): This tax applies when goods are sold between states within India.
  • SGST (State GST): This tax is paid when the seller and buyer are located within the same state. The collected amount goes to the state government.
  • CGST (Central GST): Similar to SGST, this tax also applies to sales within a state, but the revenue goes to the central government.

Additional Taxes Businesses Need to Consider

Indian businesses may encounter other tax situations besides the basic GST categories. Here’s a quick rundown:

  • TDS (Tax Deducted at Source): When a business makes a payment to a supplier, they might need to deduct TDS from the total amount before paying. This deducted amount is then deposited with the government.
  • TCS (Tax Collected at Source): This applies specifically to e-commerce platforms. When a seller uses an online platform to sell their products, the platform might deduct a small percentage (2% in India) of the sale as TCS before transferring the remaining amount to the seller.
  • Reverse Charge: In some scenarios, the responsibility of paying the GST might shift from the seller to the buyer. This is called “reverse charge.”
  • Interest, Late Fees & Penalties: Just like any other tax, missing deadlines or underpaying GST can result in additional charges like interest, late fees, and penalties.

Calculating Your GST Payment (India)

Indian businesses need to calculate their GST payment by subtracting the “input tax credit” from their “output tax liability.” Let’s break down these terms:

  • Input Tax Credit: This refers to the GST a business has already paid on purchases they made (like raw materials or office supplies) used for their own taxable sales. Businesses can claim this credit to reduce their overall GST liability.
  • Output Tax Liability: This is the total GST collected from customers on all their taxable sales.

Here’s the Formula:

GST Payment = Output Tax Liability – Input Tax Credit – TDS/TCS (if applicable)

Don’t forget: Once you have your net GST payment figure, deduct any TDS or TCS you might have already deposited. Add any applicable interest or late fees to get the final amount payable to the government.

Making GST Payments (India)

These payments are filed under GSTR 3 and must be submitted by the 20th of every month. You can generate a slip on the GST portal for online or offline payments. Businesses with a tax liability exceeding ₹10,000 are mandated to file online.

Claiming GST Refunds (India)

The good news is that Indian businesses and individuals can claim GST refunds online through the GST portal, but there are deadlines! Here are some common scenarios where a GST refund might be applicable:

  • International Tourists: Tourists can claim a refund on GST paid on purchases made in India.
  • Embassies & UN Bodies: Embassies and UN bodies can claim refunds on GST paid on their purchases.
  • ITC Accumulation: If your business sells tax-exempt or nil-rated goods and services, you might have accumulated input tax credit (ITC) that you can claim as a refund.
  • Finalization of Provisional Assessment: After a final assessment of your tax liability, you might be eligible for a refund if you have already paid more than necessary.
  • Exports: Businesses exporting goods or services can claim a rebate or refund on the GST paid on those exports.

Understanding Goods and Services Tax/Harmonized Sales Tax (GST/HST) in Canada

Canada has a system similar to India’s GST, but it’s called the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST) depending on the province. Most goods and services sold within Canada are subject to this tax, including purchases of property like land and buildings. It even applies to digital products downloaded online!

GST/HST Rates in Canada

The GST/HST rate in Canada varies by province. Here’s a quick breakdown:

  • 5% GST: Applies in Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec, Saskatchewan, and Yukon.
  • 13% HST: Applies in Ontario.
  • 15% HST: Applies in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island.

Who Pays GST/HST in Canada?

Almost everyone in Canada pays GST/HST when they purchase taxable goods and services. However, there are some exceptions, such as:

  • Status Indians: Individuals registered under the Indian Act and entities controlled by Indian bands are generally exempt from GST/HST.
  • Public Services: Many public services like healthcare and education are also exempt.

GST/HST Refunds in Canada

The Canadian Revenue Agency (CRA) offers GST/HST credit refunds to low- and modest-income individuals and families. These are tax-free, quarterly payments that help offset the amount of GST/HST they’ve paid throughout the year. In some cases, provincial and territorial credits might also be available.

Eligibility for GST/HST Credit (Canada)

To be eligible for these credits, you need to meet specific criteria set by the CRA. Here are some key factors:

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  • Net Family Income: Your net family income for the previous year must fall below a certain threshold. This threshold is adjusted annually, but for reference, in 2022, it ranged from $52,255 to $69,105.
  • Marital Status & Number of Children: Your marital status and the number of children in your family also play a role in determining eligibility.
  • Canadian Residency: You must be a resident of Canada during the credit payment period.
  • Age: You must be 19 years of age or older.
  • Filing Status: Canadian citizens who file annual tax returns are automatically considered for these credits.

How to Claim GST/HST Credits (Canada)

  • Newcomers: If you’re new to Canada and don’t have children, you can apply for the credit by filling out Form RC151.
  • With Children: If you have children, you need to fill out Form RC66.
  • Unsure of Eligibility: If you’re unsure about your eligibility or have any questions, visit the CRA website for detailed information and application forms.

GST: A System Designed for Fairness

The GST/HST system helps raise revenue for the government, which is then used to fund various public services and programs. While it might seem like a small expense at the time of purchase, these taxes collectively contribute significantly to the nation’s well-being. Understanding the basics of GST payments and refunds empowers both businesses and individuals to navigate the system efficiently.

Remember: This guide provides a general overview. Tax rules and regulations can be complex and change over time. It’s always recommended to consult with a tax professional for specific advice related to your situation.

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