Unless you exclusively buy from a select range of exempt items, most of your purchases will be subject to Canada’s goods and services tax (GST). To help alleviate the financial burden of sales tax, the federal government offers the GST/HST credit to eligible Canadians and their families.
This includes various goods and services, real estate transactions, and even purchases of digital downloads. In certain provinces, the GST is combined with the provincial sales tax to create the harmonized sales tax (HST).
What the GST/HST credit is?
The Canadian tax system offers a range of tax credits, but the GST/HST credit stands out as it is paid out in installments and is not simply applied to the amount of federal tax owed or refunded. The GST/HST credit is a tax-free quarterly payment designed to reduce the burden of GST and HST on those with low or modest incomes when they purchase goods and services. Eligibility extends to families and individuals, and the credit may include payments from provincial and territorial tax credit programs.
When you file your taxes, the GST/HST credit is automatically assessed, and you may be required to make individual payments based on your family’s income and the number of children under 19 living with you. In 2023, the credit amount varies depending on your circumstances: if you are single, you could receive $456; if you have a common-law spouse, you could receive $598, plus an additional $157 for each child under the age of 19 living with you.
Who is eligible for the GST/HST credit?
To be eligible for the GST/HST credit, you must be a Canadian resident for income tax purposes in the month before and at the start of the month in which the CRA makes the payment. You also need to fulfill at least one of the following requirements:
- Be 19 years of age or older
- Have a spouse or common-law partner, or had one in the previous year
- Be a parent who lives or previously lived with their child
If you share custody of a child, you may qualify for half of the GST/HST credit, along with any applicable provincial and territorial credits.
However, you are not eligible for the GST/HST credit if you are a non-resident for tax purposes in Canada, an overseas official, or a foreign employee who avoids paying taxes in Canada. Additionally, if you have been incarcerated for 90 or more consecutive days in a jail or other type of penal facility, you cannot claim the credit.
What is the process for applying for a GST/HST credit?
If you are a Canadian resident and file an annual tax return (even if you have no income to declare), you will automatically be eligible for the GST/HST credit. However, if you are a new resident of Canada, you must complete a form and deliver it to a nearby tax center. The specific form required depends on whether or not you have children.
If you have children, you will need to fill out the Canada Child Benefits Application (Form RC66), which covers all child and family benefits, including the GST/HST credit. If you don’t have children, you’ll need to fill out Form GST/HST Credit Application for Individuals Who Become Residents of Canada.
You may also apply for the GST/HST credit for your child. If you have already filed for and received the Canada Child Benefit (CCB), you are likely already eligible for their portion of the GST/HST credit. However, if you haven’t applied for the CCB or have had another child since, your child may need to be registered for the GST/HST tax credit.
You can accomplish this by selecting “apply for child benefits” through My Account on the CRA website. You will need to verify your identity, citizenship, and marital status, as well as provide basic information about your child, including their name, gender, and date of birth.
What is the method for calculating the GST/HST Credit?
The GST/HST credit payments are calculated by the Canadian Revenue Agency through the addition of supplements based on factors such as children and dependents, family net income, and other considerations to a base credit amount of $299. The payments gradually decrease after your net income exceeds $38,892. Here is a summary of the basic calculations involved:
- A base credit of $299
- PLUS a credit of $299 for a spouse or common-law partner
- PLUS a credit of up to $157 for each child if the family’s income exceeds $9,686
- MINUS a reduction of 5% if your net income exceeds $38,892
If you are single, childless, and earn more than $48,012, you will not be eligible for GST/HST credits. To determine the amount of credit you will receive, you can use the GST/HST credit computation sheets provided by the CRA or the CRA’s online calculator to calculate your GST/HST credits and Canada Child Benefits.
How to Apply for a GST/HST Credit
Normally, the Canada Revenue Agency (CRA) automatically enrolls eligible individuals for the GST/HST credit. However, if you are a new resident of Canada or have a child who is not enrolled in the Canada Child Benefit (CCB), you may need to apply.
For new immigrants to Canada, you can claim the GST/HST credit by submitting one of the following forms to the CRA tax office:
- If you are a Canadian citizen without children, use Form RC151 to apply for the GST/HST credit.
- If you have children, use Canada’s Form RC66 Child Benefits Application for Residents with Children to apply for all child and family benefits, including the GST/HST credit.
GST/HST Credit Eligibility for a New Child
Adding a new child to your household makes them eligible for the GST/HST credit, whether they are a new addition or have just moved in with you. There are two options to do so: you can either submit a Canada Child Benefits (CCB) application through the “CRA My Account” or add the child to your household.
In conclusion, this blog aims to provide you with a better understanding of the GST/HST credit, which may seem complex. However, you can always seek professional assistance if needed.