Quick Method of GST

The Canada Revenue Agency offers eligible small businesses the option to utilize the Quick Method for calculating GST/HST remittances, a streamlined alternative to the standard GST/HST reporting methodology. This method simplifies the calculation process and minimizes the documentation requirements.

Under the Quick Method, registrants must continue to charge their clients or customers GST at the standard rate of 5% or HST at the relevant provincial rate on all taxable supplies of property and services. To compute the GST/HST remittance amount, however, registrants apply reduced Quick Method remittance rates to their total revenue. These rates vary depending on whether the business primarily sells goods or provides services.

It is important to note that most Input Tax Credits (ITCs) cannot be claimed for purchases made throughout the fiscal year when using the Quick Method. However, businesses are entitled to a 1% credit on the first $30,000 of eligible supply revenue, where GST at 5% or HST at the applicable rate is collected annually. To qualify for this credit, a business must have elected the Quick Method at the start of the fiscal year or, for new registrants, from the date of registration.  Also see quick method remittance rates.

Eligibility for the Quick Method is contingent upon meeting the following criteria:

• The business must have a permanent establishment in Canada.
• The business has been active continuously for a 365-day period immediately preceding the current reporting period.
• There has been no revocation of an election for the Quick Method or a simplified method for claiming ITCs during that 365-day period.
• The business is not one of the excluded types, such as those providing professional services (e.g., tax, legal, accounting), listed financial institutions, charities, public institutions, non-profits receiving significant government funding, municipalities, public educational institutions, or hospital authorities.
• The business’s annual worldwide taxable supplies, including zero-rated supplies and those of associated entities, do not exceed $400,000 for any of the periods consisting of the first or last four consecutive quarters out of the last five fiscal quarters.

In addition, You must have a permanent establishment in Canada to use the quick method. Certain registrants cannot use the quick method, including lawyers (or law offices), accountants, bookkeepers, financial consultants, and listed financial institutions.

When is the Quick Method Most Advantageous

The GST Quick Method is particularly beneficial for small businesses when the potential Input Tax Credits (ITCs) they would normally claim under the standard GST/HST system are minimal compared to their overall revenue. This method is advantageous if a business’s ITCs are less than the remittance rates provided under the Quick Method, which simplifies the remittance calculation by applying a flat rate to sales. This is especially suitable for businesses with high sales volumes but low GST/HST on purchases, such as service-oriented businesses with minimal taxable inputs. Moreover, the Quick Method reduces administrative overhead by streamlining tax calculations and reporting requirements. It is an effective tax strategy for businesses looking to minimize their tax burden and administrative costs, particularly when their annual worldwide taxable supplies—and those of their associates—are below $400,000, making the process more manageable and potentially more profitable.

How to Elect to Use the Quick Method

Businesses and authorized representatives can elect to use the Quick Method for GST/HST calculation through the CRA’s online platforms, My Business Account for business owners, or Represent a Client for Representatives. Alternatively, Form GST74 can be submitted to make this election. Once elected, this method remains effective as long as the business’s total annual worldwide taxable revenue, including associated entities, remains below $400,000 and the business type does not fall under the excluded categories. If these conditions change or the business exceeds the revenue threshold, the method of accounting for GST/HST must revert to the regular method. The specific timing for reverting depends on the business’s fiscal year and filing frequency, with transitions typically occurring at the start of the next fiscal year or quarter, contingent upon when the conditions change or thresholds are exceeded.

How to Revoke the Quick Method

To revoke an election to use the Quick Method for GST/HST, businesses must ensure that their election has been in effect for at least one year. Business owners can manage this revocation through the CRA’s My Business Account, while authorized representatives or employees may use Represent a Client. Alternatively, Form GST74 can be completed and submitted for this purpose. The revocation must be processed by the due date of the GST/HST return for the last reporting period in which the Quick Method was used. Once revoked, there is a mandatory waiting period of at least one year before the Quick Method can be re-elected. Additionally, upon cessation of the Quick Method, Input Tax Credits (ITCs) cannot be claimed for taxes paid on purchases made during the period it was used, except for any unclaimed ITCs that were eligible during that time.

Conclusion

The Quick Method of GST/HST remittance provides substantial administrative advantages for eligible businesses, streamlining tax calculations and potentially reducing overall tax liability. To assess whether your business qualifies and to explore the full benefits of this method, we recommend consulting with a seasoned professional. At Shajani CPA, our team of expert CPAs is well-versed in GST/HST regulations and can offer personalized guidance to optimize your tax strategy. Contact us today to ensure that your business is making the most of every opportunity for financial efficiency and compliance.

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2024 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning service.