Goods and Service Tax (GST Singapore)
Goods and Service Tax (GST) in Singapore can have a significant impact on businesses operating within the country. Understanding the intricacies of this tax system is crucial for maintaining compliance and optimizing financial performance. In this article, we delve into the key aspects of GST that businesses need to know, including registration requirements, filing processes, schemes, and more!
The Goods and Services Tax (GST) is an essential aspect of the Singapore taxation system, impacting businesses, consumers, and the government. This comprehensive guide will provide you with the knowledge and understanding necessary to navigate the complexities of GST, whether you are a business owner, consumer, or simply interested in the Singapore tax landscape.
Introduction to GST
The Goods and Services Tax (GST) is a consumption tax that was implemented in Singapore on 1st April 1994. Modeled after the UK VAT legislation and New Zealand GST legislation, it is administered by the Inland Revenue Authority of Singapore (IRAS). The implementation of GST results in a reduction of both personal and corporate income tax rates, while ensuring a consistent source of revenue for the government.
Raised from 7% starting on January 1st of 2023, the GST rate in Singapore is currently 8%. As an indirect tax, it is levied on the supply of goods and services within Singapore and the import of goods into the country. GST-registered businesses act as collecting agents for the tax department, charging GST on their goods and services and remitting the collected tax to the authorities.
GST for Singapore Companies
If you own a business that is registered for GST in Singapore, you must collect GST from the clients who purchase your goods and services. For example, if you charge S$100 for your services, you must invoice your customer S$108 (S$100 for the service plus 8% GST). The GST amount that is listed on the invoice must be submitted to the tax department in Singapore every quarter by means of GST filing.
Singapore companies, however, are not automatically registered for GST. Those that meet certain conditions must apply to IRAS to become a GST-registered company before they are allowed to charge and collect GST.
GST Registration
Businesses must continually assess their need for GST registration, which falls into two categories: compulsory registration and voluntary registration.
Compulsory Registration
In the event that your taxable turnover surpasses S$1 million by the conclusion of the calendar year, you are required to register for GST before 30th January and will be registered on 1st March, following a retrospective basis. Alternatively, if you are currently generating sales and anticipate your turnover to exceed S$1 million over the next 12 months, you must register for GST on a prospective basis. When your revenue exceeds S$1 million, you must submit a GST application to IRAS within 30 days.
Voluntary Registration
You may voluntarily register for GST if you are not liable for compulsory registration. You must have plans to make sales or have started making sales of taxable supplies in Singapore.
- If you choose to register for GST voluntarily, you must follow these requirements:
- Remain registered for a minimum of two years
- Adhere to GST regulations.
- Submit GST returns quarterly.
- Keep records for at least five years.
- Continue to comply with any additional requirements set forth by the tax authority (even if you deregister from GST after your business has ceased).
Exemption from Registration
If your business solely deals with zero-rated supplies, you have the option to request an exemption from registration, even if your taxable turnover surpasses the registration criteria. This will enable you to avoid the administrative obligations that come with GST registration and the consequent submission of quarterly GST returns. The exemption will be granted by the IRAS if more than 90% of your overall taxable supplies are zero-rated and if your input tax outweighs your output tax.
Important Note: Zero-rated supplies refer to the goods and services that are GST at 0%. Examples include international services or exported goods.
De-registration
You have the option to terminate your GST registration in the following scenarios:
- When your business operations stop.
- When your business is entirely sold to another party.
- When your sales figures do not go beyond S$1 million.
Within 30 days from the cessation date, you must file an application form and submit the necessary documents to the tax authority.
GST Filing and Refunds
GST-registered entities must submit a GST return (GST F5) to the tax authorities based on their accounting cycle, typically on a quarterly basis. In this return, you will indicate the total value of your local sales, exports, and purchases from GST-registered entities, as well as the GST collected and claimed for that accounting period. GST returns are currently submitted electronically, and the IRAS must receive your return no later than one month after the conclusion of your designated accounting period.
GST Taxable Supplies
GST is charged on taxable supplies, which are supplies of goods or services made in Singapore. Taxable supplies can either be standard-rated (currently 8%) or zero-rated.
The majority of domestic sales of goods and the provision of local services in Singapore are considered standard-rated supplies. Meanwhile, zero-rated supplies of goods and services are levied with 0% GST and comprise the exportation of goods and the provision of international services.
Examples of GST taxable goods and services in Singapore include:
- Sale of goods such as furniture, electronics, and clothing.
- Provision of broadcasting and telecommunication services.
- Sale and lease of commercial properties.
- Provision of professional services such as consulting, legal, and accounting services.
- Provision of food and beverage services.
GST Registration Procedure
To register for GST in Singapore, it is mandatory to provide the tax authority with the Goods and Services Tax registration form (GST F1) and the essential supporting documents. For partnerships, an additional form (GST F3) detailing all partners must be completed. Separate application procedures/forms are available for overseas companies, group registration, and divisional registration.
The registration process takes approximately three weeks. Upon successful registration, you will receive a Notification of GST Registration letter containing your GST number, effective date of registration, filing frequency, and due dates, as well as any special instructions. To start a GST registration or file your GST returns head to the official IRAS myTaxPortal.
Implementing GST in Singapore Businesses
As a GST-registered entity, you are responsible for charging GST on the supply of goods and services and remitting the GST charged to IRAS. GIRO payment arrangements via a Singapore bank account are the preferred method of payment.
You can either charge GST on top of your selling price or absorb the GST by treating the price as GST-inclusive. All GST-inclusive prices must be displayed, advertised, and quoted verbally or in writing. Failure to do so is illegal and may lead to penalties.
If the customer is a GST-registered entity, a tax invoice should be provided during billing. This document serves as a supporting record that enables the customer to claim input tax on standard-rated purchases.
GST Schemes to Aid Businesses
The Singapore Government has introduced several GST assistance schemes to help businesses, easing cash flow and creating a pro-business environment. These schemes include:
- Cash Accounting Scheme: An accounting method in Singapore where businesses only account for GST on sales and purchases when payment is received or made, rather than when an invoice is issued.
- Discounted Sale Price Scheme: A method of calculating GST in Singapore where businesses only pay GST on the discounted sale price of goods sold, rather than on the full sale price.
- Gross Margin Scheme: A method of calculating GST in Singapore where businesses only pay GST on the profit margin of goods sold, rather than on the full sale price.
- Hand-Carried Exports Scheme: A program in Singapore that allows individuals to claim a GST refund on goods they are carrying out of Singapore as part of their personal luggage.
- Import GST Deferment Scheme (IGDS): A program in Singapore that allows businesses to defer payment of GST on imported goods until the goods are sold or used in their business.
- Major Exporter Scheme (MES): A program in Singapore that allows businesses that export a significant amount of goods to defer payment of GST until the goods are sold or exported.
- Tourist refund scheme: A program in Singapore that allows tourists to claim a refund on the Goods and Services Tax (GST) paid on goods purchased in Singapore, when they are leaving the country.
- Zero GST Warehouse Scheme: A program in Singapore that allows businesses to store imported goods in a warehouse without paying GST until the goods are sold or exported.
Wrap Up
Understanding the intricacies of the Goods and Services Tax (GST) in Singapore is crucial for businesses to comply with tax regulations and take advantage of available assistance schemes. This comprehensive guide has provided you with the necessary information to navigate the GST landscape in Singapore, ensuring you are well-equipped to handle the tax requirements for your business or personal needs. If you have any additional questions contact us at Intracorp today.
