GOODS & SERVICES TAX CREDIT (GSTC)

Could you use a little bit of extra money to help cover the taxes on the products and services you buy?

Well, That's what the Goods & Services Tax Credit (GSTC) is for! Here's everything you need to know, starting with some definitions.

To perform the duties of an office or employment

To carry on a business either alone, or as a partner actively engaged in the business

To carry on research, or any similar work, for which the taxpayer or supporting person received a grant

The cost of caring for children is allowed as a deduction for tax purposes from the income of a working parent. Form T778 must be completed and attached with the tax return to claim child care expenses.

WHAT IS GST?

The Goods & Services Tax (GST) is a tax that applies on most supplies of goods and services made in Canada. It also applies to supplies of real property (e.g., land, buildings, and interests in such property) and intangible property such as trademarks, rights to use a patent, and digitized products downloaded from the Internet and paid for individually.

The Federal GST portion of the Sales Tax is 5%.

The participating provinces (New Brunswick, Newfoundland and Labrador, Nova Scotia, PEI and Ontario) harmonized their provincial sales tax with the GST to implement the Harmonized Sales Tax (HST) as of July 1, 2010. The combined harmonized rate is 13% for Ontario.

INTRODUCING THE GSTC

The Goods & Services Tax Credit is designed especially for individuals and families with a lower income. It is based on net income for the taxation year. Furthermore, It is normally paid in four equal instalments over the year; in July, October, January and April. However, if the GSTC payment is less than $50 per quarter, the CRA makes one payment for the GST credit in July. The CRA also mails one cheque for GSTC amounts owed from previous years. A taxpayer must file an income tax return to receive the GST credit.

In the case of married or common-law couples, only one spouse can receive the GST Credit. Regardless of which spouse receives it, the credit will be the same since it is based on the combined net family income. Due to this, any changes in marital status must be reported to the CRA immediately as this will affect the GST credit.

The GST credit is calculated based on the family net income (including worldwide income) and size of the family. World income is the income from all sources inside and outside of Canada. Each quarterly payment is based on the taxpayer's current family situation: marital status, number of eligible children, and residency status. If the family situation changes at any time during the year, the taxpayer has to inform the CRA as soon as possible so that the payments can be adjusted based on the new family size and income.

Do note that the Ontario government provides tax relief for low income taxpayers with their own provincial tax credits called the Ontario Trillium Benefit (OTB)

WHO CAN APPLY?

Individuals can apply for the GST credit, for income tax purposes, if they are a resident of Canada. This should occur at the beginning of the month when the CRA makes payments, and if at least one of the following applies:

They are 19 years of age or older

If they are under 19 years of age, then they are eligible only if:

A day camp or day sports school

the taxpayer has (or previously had) a spouse

In the case of married or common-law couples, only one spouse can receive the GST Credit. Regardless of which spouse receives it, the credit will be the same since it is based on the combined net family income. Due to this, any changes in marital status must be reported to the CRA immediately as this will affect the GST credit.

Note: An individual who is turning 19 before April 1, 2022 should file a 2020 tax return even if their income is nil to receive the GST credit.

Individuals do not qualify for the GST credit if, at the beginning of the month in which the payment is issued:

The individual is confined to a prison or similar institution and has been there for 90 days or more

The individual is not required to pay tax in Canada because they are an officer or servant of another country, such as a diplomat their family members or employees of diplomats

In the case of married or common-law couples, only one spouse can receive the GST Credit. Regardless of which spouse receives it, the credit will be the same since it is based on the combined net family income. Due to this, any changes in marital status must be reported to the CRA immediately as this will affect the GST credit.

GST/HST CREDIT FOR DEPENDENT CHILDREN

We all know that raising children is no easy task for you, or your back account. Luckily, it entitles you to additional GST credits!

The GST credit can be claimed for each dependent child:

Under the age of 19

Who has never had a spouse or a common-law partner

Who has never been a parent

Who either lived with or was claimed as a dependent by a taxpayer or a taxpayer’s spouse at the beginning of the month in which the CRA makes payments

The child must be a Canadian resident

For additional information on GST/HST credits, please visit : Learn More