The GST quick method: a simpler way to remit for a small BC business

Short answer: the quick method lets a small GST registrant charge GST as usual but remit a percentage of its GST-inclusive sales, instead of the GST collected less input tax credits on every purchase. A business can elect it if its worldwide taxable sales, with its associates, were CAD 400,000 or less, GST included, in either the first four or the last four of its last five fiscal quarters. The election is made on form GST74 or through the CRA account, and it applies to GST only. BC PST is separate.

How does it work?

• You charge customers GST at the usual rate, and show it on invoices as before.
• On the return, you remit a percentage of your GST-inclusive sales. The percentage is lower than the rate you charged, because it allows for the input tax credits you no longer claim line by line.
• You get a 1% credit on the first CAD 30,000 of eligible sales each fiscal year, GST included.
• For a business in BC, where 5% GST applies, the CRA’s RC4058 gives 3.6% of GST-inclusive sales for a business providing services, and 1.8% for one buying goods for resale, which needs goods bought for resale to be at least 40% of the previous year’s taxable revenue.

An illustration with made-up numbers: a BC consultant with CAD 52,500 of sales including GST in a year remits 3.6% of it, CAD 1,890, less the 1% credit on the first CAD 30,000, which is CAD 300. That is CAD 1,590, against the CAD 2,500 of GST collected. Input tax credits on most purchases are not claimed, so the comparison only favours the quick method if those purchases are small.

Who can use it, and who should not?

• The sales test above, and a permanent establishment in Canada.
• Some businesses cannot use it: those providing bookkeeping, financial consulting, tax consulting or tax return preparation services, legal, accounting and actuarial professionals, listed financial institutions, charities and public bodies, among others. Sales of real property, capital assets and financial services are left out of the revenue test.
• It tends to suit a business with few purchases on which GST is paid. A business with large GST-bearing purchases of inventory or supplies can be worse off, because most input tax credits are no longer claimed. RC4058 explains which purchases can still be claimed.

How do I elect, and can I leave?

• File form GST74, or elect through the CRA business account.
• The election starts on the first day of a GST reporting period.
• Once you elect, you have to stay in for at least a year.
• After you revoke the election, you wait at least a year before you can elect again.

What your books need to show

• GST-inclusive sales for each reporting period, since the percentage applies to them.
• Which sales are eligible and which are not, such as sales that are outside the method.
• PST kept separate, collected and reported on its own return.
• The date the election began. RC4058 sets out when it can first be ended.

GST registration and input tax credits →

Late GST returns and penalties →

BC small business tax calendar →

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