Tax saving with the quick method of GST/HST Filing

What is HST Quick Method

The quick method is a simplified accounting method allowed by the Canada Revenue Agency (CRA) to facilitate small businesses calculating their net tax for GST/HST purposes.

While using the quick method, you still charge the applicable GST/HST on your supplies of taxable goods and services. However, to calculate the amount of GST/HST payable, multiply the revenue from your taxable supplies (including the GST/HST) for the reporting period by the quick method remittance rate, or rates, that apply to your situation.

The remittance rates of the quick method are less than the applicable rates of GST/HST that you charge meaning you remit only a part of the tax that you collect (or collectible) while you don’t claim the input tax credit on your purchases. In most cases, this results in significant savings every year.

The benefit of the Quick method Benefit:

• Calculating GST/HST remittances (payable) and filing GST/HST returns is much easier since it eliminates the need to record and report the actual GST/HST paid or payable on most purchases.
• In most cases, the quick method results in less GST/HST payable as the remittance rates are lower than the actual GST/HST collected.
• By using the quick method, your business is also entitled to a 1% credit on the first $30,000 of revenue (including GST/HST) you earned each fiscal year.
• This method also saves from CRA’s audit because its calculation method is based on a predefined rate.

The Quick method Remittance Rates

There are different rates for businesses that purchase goods (raw materials) for resale and businesses that provide only services. Rates for different provinces are based on GST/HST rate applicable. For businesses in Ontario, the quick method remittance rate is 8.8% for a service-based business and 4.4% for a goods-resale business.

Who is eligible for electing the quick method:

• You can use the quick method if you meet all of the following conditions:
• You have been in business continuously throughout the 365 days ending immediately before your current reporting period (if you are a new registrant, you can still qualify)
• You did not revoke an election of the quick method or the simplified method for claiming ITCs during those 365 days.
• You are not a business that is specifically ineligible for using this method
• Your revenues (including the GST/HST) from annual worldwide taxable supplies, (including zero-rated supplies) and those of your associates, are not more than $400,000 for either the period consisting of the first four consecutive fiscal quarters out of your last five fiscal quarters or the period consisting of the last four fiscal quarters out of your last five fiscal quarters.
• You must have a permanent establishment (place of business) in Canada to use the quick method.

Businesses ineligible for the quick method:

Some businesses are ineligible for the quick method including:

• Provide accounting, bookkeeping, actuarial services, financial consulting, tax consulting, or tax return preparation services
• Listed financial institutions.
• Charities, public institutions, municipalities, or local authorities designated as a municipality
• Certain non–profit organization
• Public colleges, school authorities, or universities, that are established and operated other than for profit
• Hospital authorities, facility operators, or external suppliers

When can you make the election:

• If you file annual GST/HST returns, you must make the election by the first day of your second fiscal quarter.
• If you file monthly or quarterly GST/HST returns, you have to make your election by the due date of the return for the reporting period in which you begin using the quick method.
• If you previously elected to use the quick method and have revoked that election, you have to wait at least one year from the date the revocation became effective before you can elect to use the quick method again.

How do you elect to use the quick method?

You can elect to use the quick method by using CRA’s online services:

• My Business Account, if you are a business owner
• Represent a Client, if you are an authorized representative or employee
• You can also elect to use the quick method by filling out Form GST74, Election and Revocation of an Election to Use the Quick method of Accounting.

Claiming input tax credits

Using the quick books method, you don’t claim ITC on the purchase, because the part of the tax that you keep, accounts for the approximate value of the ITCs you would have claimed for GST/HST paid on purchases had used the regular method to prepare your GST return.

However, you can claim any ITCs for certain items including:-

• Purchases of real property and improvements to real property
• Purchases of capital property
• Purchases on which GST/HST became payable before your quick method election took effect

Supplies are not eligible for the quick method calculation:

Similarly, some supplies are ineligible for the quick method. If you make a supply that is not eligible, you need to account for such supplies using the regular method instead of applying the quick method rate.

The following supplies are not eligible for the quick method calculation include:

• Supplies on which the customer does not have to pay the tax, such as zero-rated supplies or made outside of Canada
• Sales of real property or capital assets
• Supplies made to an employee or shareholder for which you must account for tax on the value of the supplies and that is to be included in the individual’s income as a taxable benefit for income tax purposes
• Supplies for which you had to self-assess tax because you appropriated the supply (product or service) for the personal benefit of yourself, a shareholder, or related person

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Disclaimer: The above contents are provided for general guidance only, based on information believed to be accurate and complete, but we cannot guarantee its accuracy or completeness. It does not provide legal advice, nor can it or should it be relied upon. Please contact/consult a qualified tax professional specific to your case.