Overview of GST/HST for a digital economy – (2021 tax compliance)

  • by admin
  • March 5, 2022

The Government of Canada has introduced new rules of GST/HST with effect from July 01, 2021. The businesses operating in the digital economy, including digital platforms, need to comply with the three originally announced measures on April 19, 2021. These three measures include registration, filing GST, and collection.

Administrative approach and compliance

The purpose of these measures is to bring an element of fairness in the ecommerce transactions and ensure the right amount of GST/HST is applied. However, obligations are new and might be challenging. So, the Government of Canada announced during federal budget that CRA – (Canada Revenue authority) shall work in close cooperation with the digital platforms and help apply GST/HST.

Further, if digital platforms and businesses show that they have taken reasonable measures and are still unable to meet obligations on account of operational difficulties. In that case, CRA might take a flexible approach and allow discretionary exemption in procedural compliance. However, that’s only applicable to the transition period that starts from July 1, 2021.

Further, an affected business must obtain written approval from CRA for discretionary relaxation of the procedural compliance for GST/HST.

Types of the affected business with the new rules of GST/HST

The effect of rules varies from business to business. Depending on business needs, it may be affected by any of these measures or all three. For instance, you may not be required to pay GST/HST. However, your customers may need to pay if facilitated through a digital platform. Let’s discuss some of the types affected by the rules.

1- Digital product or services (cross border trade)

The rules will affect non-resident digital platforms facilitating digital services like music and traditional items in Canada; these services are consumed by Canadian entities and Canadian citizens (not registered under the normal GST regime).

However, procedural requirements for registration and filing have been simplified to ensure appropriate compliance with the new measures.

2- Supplies of qualifying goods to Canada

The rules affect non-resident platforms and non-resident vendors who supply qualifying goods in Canada. Qualifying goods include tangible personal property supplies. The distribution platforms are not exempted from new measures.

3- Platform-based short terms accommodation

The rules affect suppliers of short-term accommodation in Canada; it includes platform-based accommodation providers. However, a simplified process of registration and remittance has been introduced under these measures.

Conclusion

With effect from July 01, 2021, the GST/HST has been introduced on digital supplies in Canada. Under new rules, three measures have been introduced that include registration, filing, and collection aspects.

Further, the Government of Canada has given a direct CRA to cooperate with the businesses affected by new rules.  Likewise, certain flexibility has been given regarding procedural compliance. However, written approval must be obtained from CRA to prove operational difficulties.

Three types of businesses have been identified: cross-border sales of digital services, supplying qualifying goods in Canada, and supplies for short-term accommodation.

If you still want to get further clarification on newly established GST rules. In that case, our team of qualified professional accountants can offer a customized services to bring your business to the next level.

Disclaimer: Information in the blog/post/article has been presented for a broad and simple understanding. This is not legal advice. RKB Accounting & Tax Services does not accept any liability for its application in any real situations. You need to contact your accountant or us for further information

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