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silverliningsolar
July 17, 2022
Question

What is the effect of zeroing GST on invoice subtotal vs using zero rated tax code? How does that affect ITC balances and net GST payable?

  • July 17, 2022
  • 1 reply
  • 0 views
We are a Canadian business with a purchase made  from US client.  This makes them GST exempt,  but still exposed to provincial tax.  The bookkeeper says just zero out the GST at invoice subtotal,  but there would be no associated tax code for ITC balancing......or will there?

1 reply

Jen_D
Jen_D
July 17, 2022

Thanks for reaching out to us about this using GST on invoices, @silverliningsolar.

 

I can share some insights with the difference between zeroing GST on invoice subtotal and using zero rated tax code. 

 

When you zero out the tax amount on a sale, the transaction is still recorded as taxable for GST. However, the reported on the tax reports are recorded as 0. For zero-rated entries, the government doesn't tax its sale but you can still claim input tax credits on the expenses that you incur in order to earn the income. 

 

For example, when you're providing services in Canada, they’re taxable. However, when you work for people in the U. S., they’re zero-rated or taxable at zero percent. 

 

I'm adding here a list of common sales tax codes and what they are used for.

 

Please update me if you need further help with this GST concern. I'll be more than happy to help you out.

S
silverliningsolarAuthor
July 19, 2022

Further to this...

Which codes would I use for these two scenarios?

 

1) Zero Rated GST with NO applicable Provincial Tax (British Columbia)     ie: Zero c/w NO PST 0%/0%

2) Zero Rated GST, but WITH applicable Provincial Tax (British Columbia)   ie:  Zero+ PST 0%/7%

 

According to what I've read on the eTax BC site, Out of country clients SHOULD BE charged PST (except where exempt as in some solar components and labour)

 

Thanks for this. I realize it may be unique.

 

 - Rick

 - Sliver Lining Solar

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