A GST credit is a tax deduction that businesses can claim for the Goods and Services Tax (GST) they have paid on eligible purchases.
Here's an example:
- Scenario: A bakery purchases flour, sugar, and other ingredients to make cakes. The bakery pays GST on these purchases.
- GST Credit: The bakery can claim a GST credit for the GST paid on the ingredients. This credit will reduce the amount of GST the bakery owes to the government on its sales.
Practical insights:
- Eligibility: Not all purchases qualify for GST credits. Generally, only business expenses are eligible.
- Claiming: Businesses typically claim GST credits on their activity statements or tax returns.
- Benefits: GST credits can help businesses save money on their taxes and improve their cash flow.
