When you start a business, you need to register for goods and services tax (GST), a value-added tax on the supply of goods and services sold to domestic and international customers. The tax is levied on the sale price of the goods and services and is paid by the consumer.
In any government-regulated economy, businesses are required to remit taxes. The tax amount is generally a percentage of the total sale. Governments use collected taxes to fund various programs and services.
If you’re starting a business, it’s necessary to understand how GST works and your obligations. Consequently, here are nine of the essential things you need to know about registering your business for GST.
1. Secure a valid business registration certificate.
First, you need a valid business registration certificate to register for GST. You can obtain it from the company registrar in your country of business.
Any individual, partnership, or company that carries on a business must register for GST, regardless of the business’ turnover. Likewise, whether a startup business or a large corporation, you must register for GST.
Once you have registered your business, you’ll be issued a GST registration number. It must be quoted on all invoices and receipts issued by your business. Similarly, it’s also used to claim back any GST you have paid on purchases made for your business.
2. File your GST returns.
Once your business is registered, you must file GST returns. These are periodic reports that businesses must submit to the tax authorities detailing their sales and purchases for a given period. To calculate the GST payable, businesses must subtract the value of their purchases from their sales.
The frequency of GST returns varies from country to country. As a result, in some countries, businesses must file monthly returns, while in others, businesses may file quarterly or annual returns. You may use a GST calculator to calculate the GST payable on sales and purchases.
Many businesses are required to make GST payments monthly. As a result, the tax authorities require them to make regular payments to avoid defaulting on their GST obligations.
3. Take note of GST-exempt and zero-rated items.
An essential key to understanding GST is to know which items are GST-exempt and which items are taxable. Generally, most goods and services are taxable.
However, there are some exceptions. For example, in New Zealand, some food items are GST-exempt. These include fresh fruit, vegetables, and meat. However, in Australia, some medical and health services are GST-free. These include services provided by doctors, dentists, and pharmacists.
Some goods and services are subject to GST but are taxed at a rate of 0%. We call these zero-rated items. Similarly, in most countries, basic food items such as bread and milk are zero-rated.
If you sell any zero-rated items, you can register for GST and claim back any GST you’ve paid on purchases of these items. In most cases, businesses will pass on the savings to consumers by charging lower prices for zero-rated items.
4. Claim input tax credits.
One perk of registering for GST is that your business may be eligible for input tax credits. Input tax credits are a rebate on the GST you’ve paid on purchases made for your business.
Business owners can claim input tax credits on their GST returns. Accordingly, the amount of input tax credit you can claim depends on the nature of your business and the type of purchases you’ve made.
5. Apply for GST refunds and concessions.
If you have paid more GST than you’re required to pay, you may be eligible for a refund. You must submit a GST refund application to the tax authorities to apply for a refund.
In some cases, business owners may claim a refund of GST paid on exported goods. We call this an export refund. Government-regulated economies typically have export refund schemes to encourage businesses to export goods.
Certain businesses may be eligible for GST concessions. These GST concessions are special arrangements that allow businesses to pay less GST on certain items.
Small businesses, non-profit organizations, and charities typically enjoy GST concessions. To claim a GST concession, you must submit a GST concession application to the tax authorities.
6. Keep accurate records.
It’s necessary to keep accurate records of all your sales and purchases, regardless of whether or not they’re subject to GST. It’ll ensure that you can correctly file your GST returns and claim refunds or credits.
As a bonus, keeping accurate records will also help you run your business more effectively.
Consequently, keeping accurate records of your sales and purchases ensures that you clearly understand your business’s financial performance.
7. Ensure GST compliance.
It’s also crucial to ensure that your business complies with GST laws and regulations. Non-compliance can result in significant penalties, including fines and imprisonment.
To avoid these penalties, remember to:
- file GST returns on time;
- keep accurate records of sales and purchases;
- pay GST on taxable items;
- claim input tax credits on eligible purchases; and
- comply with other GST requirements such as registration, reporting, and payment.
8. Appoint a GST agent or consultant.
When registering for GST, you may appoint a GST agent to file your GST returns on your behalf. A GST agent is typically a bookkeeping service or accountant.
Nowadays, many online accounting software programs can help you file your GST returns. However, appointing a GST agent isn’t compulsory. Nevertheless, it can save you time. Likewise, it can also ensure that you file your GST returns correctly.
If you struggle to comply with GST laws and regulations, you may consider hiring a GST consultant. A GST consultant can provide advice and assistance on GST, including registration, return filing, and compliance.
9. Know what the registration process looks like.
Businesses must register for GST in most countries if their annual turnover is above a certain threshold. The GST registration process differs from country to country. For example, in New Zealand, businesses must register for GST if their annual turnover is NZD$60,000 or more. The process is relatively simple. Business owners can complete everything online.
In Australia, businesses must register for GST if their annual turnover is AUD$75,000 or more. The registration process is slightly more complex than in New Zealand. However, business owners can still complete everything online. Owners must complete a GST application form and submit it to the Australian Tax Office to register for GST.
Depending on the availability of platforms and the owner’s preference, businesses can register for GST online or via paper application. After completion, the government issues businesses a GST registration number. It’s important to note that businesses cannot charge GST on their sales unless registered for GST.
This comprehensive guide summarizes all the key things to know about GST. By understanding these concepts, you can ensure that your business is compliant with GST laws and regulations.