The federal Goods and Services Tax (GST) is a 5% tax applied on most goods and services in Canada. To help offset the cost of the GST for low and modest income individuals and families, the government provides the GST tax credit.
In Fall 2022, the federal government announced a one-time doubling of the GST tax credit for 6 months to help Canadians deal with high inflation. Here is what you need to know about getting this increased GST credit.
Who is Eligible
You may be eligible for the increased GST credit if you meet the following criteria:
- You are a resident of Canada for income tax purposes
- You are 19 years of age or older
- You have a spouse or common-law partner or live with your child
- Your net family income falls below the thresholds based on your family situation:
- Single (no children): $49,166
- Single parent (one child): $55,286
- Married/common-law (no children): $54,313
- Married/common-law (one child): $60,434
If you already receive the regular GST credit, you will automatically get the increased amount. You do not need to apply separately.
How to Apply
If you do not currently get the GST credit but believe you are eligible, you need to file a tax return and apply to the Canada Revenue Agency (CRA).
For existing Canadian residents:
Simply file your annual tax return. Even if you had no income to report, filing a return is necessary for the CRA to determine your eligibility.
For new residents to Canada:
As a new resident, you must take additional steps to apply:
- Apply for a Social Insurance Number (SIN)
- Complete a Determination of Residency Form
- Fill out Form RC151, the GST/HST Credit Application for Individuals Who Become Residents
It may take a few months for your application to be processed before payments begin. Apply early to receive credits sooner.
Payment Amounts
The increased GST credit will double your payment for 6 months. The maximum annual amounts for 2022-2023 are:
- Single: $462
- Couple: $524
- Single parent, 1 child: $642
- Couple, 2 children: $714
So the doubled credit for 6 months could provide up to:
- Single: $231
- Couple: $262
- Single parent, 1 child: $321
- Couple, 2 children: $357
These amounts are based on your specific net family income and family situation. Payments are made quarterly, in January, April, July and October.
Impact of Increased GST Credit on Businesses
While aimed at supporting individuals and families, the increased GST credit can also impact businesses in several ways:
1. Increased Consumer Spending
With extra disposable income from the larger GST credit, more consumers may choose to spend on goods and services. This can boost revenue for businesses.
However, the impact may be limited, as those eligible for the credit are generally low and modest income households. Much of the additional funds may go towards covering essential living costs.
2. Administrative Costs
As a value-added tax, the GST is applied at every stage of production and distribution. While businesses can claim input tax credits to recover the GST they pay on inputs, tracking and reporting GST adds administrative complexity.
With a changing tax credit amount to calculate, the doubled GST credit could slightly increase compliance costs and paperwork for businesses. However, the impact is small, as systems and processes for calculating GST credits are already in place.
3. Pressure to Keep Prices Competitive
Consumers receiving the boosted tax credit may be sensitive to rising prices driven by inflation. This can put pressure on businesses to keep prices low and competitive.
Businesses with narrow profit margins may find it difficult to absorb continued cost increases without raising prices. On the other hand, those feeling inflationary pressure may have less discretionary income to spend, despite the extra tax credit funds.
4. Challenges for Small Business
Small businesses may be the most challenged by the changing tax credit, as they have less staff and capability to adapt. Adding to inflationary pressures and economic uncertainty, extra GST paperwork could increase operating costs for small business owners.
To alleviate administrative burdens, small suppliers and businesses with less than $30,000 in annual taxable supplies can use the Quick Method for calculating GST/HST. This simplifies filing requirements.
Key Takeaways
The increased 6-month GST tax credit offers timely relief to consumers struggling with rising costs. Individuals and families who meet income requirements will automatically receive bigger quarterly payments.
For businesses, the doubled credit may stimulate a modest increase in consumer spending. However, administrative hassles will be minimal and the competitive pressure to restrain prices may prove more impactful.
Careful tracking of sales taxes and input costs remains vital for managing the GST obligations businesses take on. Developing strategies to boost productivity, cut expenses and streamline operations can help offset economic challenges - with or without changes in tax credits.