What is the Quick Method (QM) of GST/HST?
CRA has developed the quick method of GST/HST to save small business owners the tax and time while calculating their net tax for GST/HST purposes. This method reduces the paperwork considerably and simplifies the calculation of GST/HST remittances because it does not require reporting of actual GST/HST paid or payable on most purchases. It allows sales taxes to be payable based on the percentage of sales.
The quick method can be used if taxable sales (including the GST/HST and zero-rated supplies) for a business and its associate does not exceed $400,000 for the fiscal year. Apart from this, certain other conditions are also required to be fulfilled to avail the quick method by a small business.
How does the Quick Method Work?
To calculate your HST owing with the Quick Method, take your sales, add your HST collected, and multiply that number by a percentage based on your business. If you purchase goods for resale, you will use 4.4% of sales in Ontario and 8.8% if you provide services. Rates are slightly different if you sell to other provinces.
Subtract up to $300 of ITCs on your eligible purchases plus full GST/HST on your capital asset purchases, and you have your net HST.
As a business owner who opts for Quick method, nothing really changes apart from how you fill out your HST remittance. Using a Quick method depends upon the GST/HST you pay on the expenses. If you have a lot of expenses with GST/HST, then Quick Method might not be a good option for you. But if you have minimal expenses, so as minimum recoverable ITC, then yes, Quick Method will be a more suitable option for you.
Who cannot use the Quick Method?
The following businesses cannot use the quick method:
- Legal, accounting, or actuarial services
- Book-keeping, financial consulting, tax consulting, or tax return preparation services
- Listed financial institutions
- Municipalities or local authorities designated as a municipality
- Public colleges, school authorities, or universities established and operated not for profit
- Hospital authorities, facility operators, and external suppliers
- Charities
- Public institutions and
- Non-profit organizations with at least 40% government funding in the year (qualifying non-profit organizations)
When can you make the election for the Quick Method?
If you file annual GST/HST returns, you have to 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 in which you begin using the quick method.
The quick method election can be made online on CRA via the My Business Account or by Represent a client.
How long does the election of Quick Method stay?
Generally, the election stays in effect as long as the total annual revenue from your worldwide taxable supplies (including the GST/HST and zero-rated supplies), and those of your associates, does not exceed $400,000, or until you become a person that cannot use the quick method because of the type of business you carry on (exceptions mentioned by CRA)
If you are considering making the election or have had GST / HST issues following the election, we at Rav Bhatia CPA Professional Corporation are there to resolve all your tax-related queries.
Book a free consultation call with us today!