The main ideas of Singapore’s Goods & Services Tax (GST) system as they apply to Singapore enterprises are summarized in this guide, including the GST definition, the registration criteria, the benefits and drawbacks of GST registration, how to file GST returns, and business assistance programs.

Singapore adopted the Goods and Services Tax (GST) on April 1st, 1994. The UK VAT and New Zealand GST laws served as models for the GST Act.

The GST is administered, assessed, collected, and enforced by the Inland Revenue Authority of Singapore (IRAS), which represents the Singaporean government in these actions. GST implementation is viewed as a way to reduce individual and corporate income tax rates while keeping the government’s revenue base stable. As it taxes expenditures, the GST is an indirect tax. The GST rate as of right now is 7%.

What is GST?

The Goods & Services Tax (GST), also known as Value Added Tax (VAT) in many other nations, is a consumption tax assessed on the supply of commodities and services in Singapore as well as the importation of goods into Singapore.

GST is an indirect tax that is applied to the selling price of goods and services delivered by GST-registered business entities in Singapore. The current GST rate in Singapore is 7%.

Since the final customer pays the GST tax, the business typically does not incur this expense. Businesses only serve as the tax department of Singapore’s collection agents.

What does the GST entail for a Singaporean business?

If your business has registered for GST, you must collect GST from clients for the goods and services you provide, and you must then pay the tax you have collected to the appropriate taxing authorities.

For instance, if a customer in Singapore paid you S$100 for your services, you would need to invoice them S$107 (S$100 for your service plus 7% GST).

The Singapore tax department must then receive this invoiced GST amount, which was obtained from the client on behalf of the tax authorities, on a quarterly basis via GST tax filing. Singaporean corporations are not automatically authorized to collect GST.

Before a company is permitted to charge and collect GST, it must submit an application to IRAS to become a GST registered entity.

Is it necessary for my business to register for GST?

Businesses are expected to regularly evaluate whether they need to be registered for GST because it is a self-assessed tax. There are two types of GST registration: compulsory registration and voluntary registration.

Compulsory registration

Registration for GST is compulsory when

• Your company’s annual revenue exceeded $1 million Singapore dollars (often referred to as the “retrospective basis”). OR

• Your company is currently turning a profit, and you have a good chance that over the following 12 months, its annual revenue will surpass S$1 million. This is referred to as the prospective basis. Included in this are any contracts or agreements you have signed in which your anticipated annual revenue exceeds S$1 million.

You have 30 days to submit the GST application to IRAS if your revenue exceeds S$1 million.

Penalties will apply if your business isn’t registered with IRAS within the allotted time frame. Anti-avoidance clauses prevent entities from being created only to maintain turnovers below the threshold and evade registration.

Voluntary registration

Depending on your business operations, you may also choose to voluntarily register for GST if you are not required to do so. The company must either have sales scheduled for Singapore or already be there (taxable supplies). If you opt to register for GST on a voluntary basis, please be aware that there are additional requirements.

Once you voluntarily register, you must keep your registration active for at least two years while also adhering to the GST rules, filing your quarterly GST return on time, and keeping all of your records for at least five years, even after your business has closed and you have deregistered from GST. You might also need to follow any additional requirements the tax authority imposes.

Exemption from Registration

Even if your taxable turnover exceeds the registration thresholds, you can petition for an exemption from registration if all of your supply are zero-rated. You are able to avoid the administrative burden of GST registration and subsequent quarterly GST filing thanks to this. If more than 90% of your total taxable supply are zero-rated and your input tax is higher than your output tax, IRAS will grant the exemption.

De-registration

You have the option to cancel your registration if your company closes, is entirely acquired by another party, or if your sales fall below S$1 million. Within 30 days of the date of termination, you must submit an application form to the tax office together with other necessary papers.

Is it necessary for a Singaporean company to collect GST tax?

No. Only if your company’s yearly revenue reaches S$1 million or if you have submitted an IRAS application to become a GST registered company are you required to register for GST and begin collecting GST.

When paying GST tax collected from customers, can the Singapore company offset the GST tax charged by its suppliers?

Yes. The GST a business collects from its clients is referred to as output tax, whereas the GST it pays to its suppliers is referred to as input tax. The difference between your input and output taxes is what you pay to (or are reimbursed by) the taxing authorities.

If a Singapore company is not GST registered, can it collect GST tax?

No, companies that are not GST-registered are not permitted to levy GST. If your firm is not registered for GST, it is illegal for you to charge and collect GST.

When a Singaporean business exports products or services abroad, is GST required to be collected?

No, GST tax is not applicable because exports are considered zero-rated supplies and are not subject to it.

Is it beneficial for a business to register for GST even if it is not required?

It Varies. You have no other option if you must register for GST. In any case, you should think about the GST registration’s benefits and drawbacks.

Benefits

To the government:

• In both strong and bad economic environments, it produces a consistent and predictable tax income.

• Due to the relatively low cost of administration and collection, it is an efficient tax.

• The Government is able to reduce company and individual income taxes as a result, which promotes an increase in foreign direct investment. As a result, the economy as a whole grows.

To businesses and individuals:

• Getting your business GST registered is frequently a signal to clients that your organization is an established business and has a particular scale. The majority of large, established businesses are GST registered.

• A fairer tax scheme is the GST. Only when people spend their money are wage earners and self-employed subject to taxation.

• GST levies are exclusively levied on consumption. Investments and savings are not taxed. This will incentivize people to save money and make investments in profitable ventures.

• Prices decrease as a result of decreased company expenses. The multi-stage credit mechanism does not result in a tax cost for businesses because the end user is the true taxpayer.

Drawbacks

• The administrative difficulty of fulfilling the obligations and duties of GST registration is the drawback of GST registration.

• The complexity of GST must be studied, or one must employ an accountant to do it, which in some situations can be rather expensive.

• Your selling price is effectively raised by 7% as a result of being GST registered. Customers who are not GST registered cannot claim the GST you charge as their own. As a result, even though you can collect GST, your costs will be lower, your customers might not be happy.

• Lower income groups may find it difficult to pay the GST, especially when there is strong inflation and the cost of basic necessities is rising.

What types of goods and services fall under the GST?

Taxable supplies are subject to GST. Any supply of goods or services that is not exempt that is made in Singapore is taxable. A taxable supply can either be zero-rated or standard rated, which is now 7%.

In Singapore, the majority of local goods sales and local service delivery are standard-rated supplies.

The GST on zero-rated supplies of goods and services is zero percent. The majority of zero-rated suppliers are exports of goods and the provision of overseas services. A GST-registered business can recoup the input tax it spent on purchases when it makes zero-rated supplies.

Two categories of exempt supplies—financial services and the sale and leasing of residential land—are not subject to the GST. It is not possible to claim input tax paid on supplies that are exempt.

Supplies that are beyond the GST Act’s purview are referred to as out of scope supplies. Typically, they are:

• Business transfer as a running concern

• Private transactions

• Sales of commodities between countries outside Singapore are referred to as “third country sales.”

• Sales made within Zero GST Warehouse

What is the process for GST registration?

The tax authority must receive a Singapore Goods and Services Registration Form (GST F1) and the required supporting papers. In the event of partnerships, a supplementary form (GST F3) containing information on each partner must be filled.

For group registration, divisional registration, and international corporations, separate application processes and forms are available. Foreign registrants are required to designate a local agent to operate on their behalf, and they must provide a letter confirming this along with their application.

Approximately three weeks pass during the registration process. You will receive a letter notifying you of your successful GST registration. Your GST number, the day your company officially registered for GST, your filing frequency and deadlines, as well as any other particular instructions, will all be included in this letter. Your GST returns must be submitted online.

How should I pay, charge, and apply GST?

• You must charge GST on the supply of goods and services as a GST-registered firm and remit the GST charged to IRAS. The preferred way of payment is through a Singapore bank account through a GIRO payment arrangement.

• Either you can absorb the GST by treating the price as GST-inclusive, or you can add the GST to your selling price.

• You must display and quote GST-inclusive pricing on any prices that are shown, advertised, published, and verbally or in writing if you are a GST-registered trader. A fine is imposed for failing to disclose prices that include GST to the general public. Prices stated, however, may not include GST if the goods and services (F&B industry) are subject to service charges.

• When billing clients who are GST registered entities, a tax invoice must be generated so that the latter can use it as proof of payment to recoup input tax on the standard-rated purchases. It can be used in place of a standard invoice and includes details on what is being sold as well as the applicable GST charged. Tax invoices must be kept in your company’s records for at least five years. It should be noted that tax invoices are not necessary to submit with your GST returns. Generally speaking, it must be issued within 30 days of the supply date. For zero-rated, exempt, and deemed supplies, as well as to customers who are not GST registered, a tax invoice is not necessary.

• If a tax invoice or a simplified tax invoice has not been produced by you after payment has been made to you, you are required to provide the payer with a serially printed receipt.

• All business transactions that have an impact on your GST declarations must be documented. Maintaining a GST account, which is a summary of your input and output tax totals for each accounting period, will also make it simpler for you to complete GST returns.

• The accounting period corresponding to the date of the tax invoice or import permits is when you should submit your input tax claims.

How can I submit a GST return?

You must file a return (GST F5) to the tax authorities as a GST-registered firm depending on your accounting cycle, which is typically on a quarterly basis. The total value of your domestic sales, exports, and purchases from GST-registered businesses, as well as the GST collected and GST claimed for that accounting period, must all be included in your return.

GST returns are now electronically submitted. Your subsequent GST return will be made available online by the end of each accounting month once you have started to e-file your GST F5. One day after the conclusion of the accounting period, you can submit your GST F5 electronically. One month following the end of your authorized accounting period, you must make sure IRAS receives your return. You must still file a “nil” return even if there isn’t any tax owed for the specified time period. If you submit the GST return after the deadline, you will be penalized. This is true whether the net GST declared is a refundable or payable sum.

One month after the conclusion of your statutory accounting period, you must pay the net GST. You will be penalized if you pay the GST after the deadline. GST refunds are typically issued within 30 days of the return’s receipt date.

Do businesses have access to any GST schemes?

The Singaporean government has unveiled a number of help programs for GST. These plans typically aid in easing the cash flow for firms and aid in fostering a supportive atmosphere for business.

• Tourist refund scheme – enables visitors to Singapore who purchase items from participating GST-registered shops to get a return of the GST paid if the purchases are made outside of Singapore.

• Cash Accounting Scheme is designed especially for small enterprises with annual sales of up to SGD 1 million.

• Gross Margin Scheme – GST is chargeable only on the gross margin of your goods.

• Major Exporter Scheme (MES) was created to aid major exporters with sizable imports in managing their financial flow.

• Hand-Carried Exports Scheme – if you wish to zero-rate your supply of goods made to an overseas customer and your goods are hand-carried out of Singapore via Changi International Airport.

• Businesses can convert their warehouses into zero-GST warehouses to cut down on paperwork and avoid the GST procedure thanks to the zero-GST warehouse scheme.

• The “Discounted Sale Price Scheme” enables you to add 50% GST on a used or pre-owned car.

• The Import GST Deferment Scheme (IGDS) enables you to defer paying GST on imports until the time that your monthly GST returns are due.

• Other Industry-Specific Scheme – The government also offers a number of GST programs for specific businesses, including shipping, logistics, and more.

Are there any industry specific GST guidelines?

The GST guides for each business have been created by the Singapore Tax Department and give you detailed information on how GST affects your industry.