What is GST?
GST or Goods and Services Tax is a consumption tax applied to all goods and services, including supplies of goods and services in Singapore. It is also termed as Value Added Tax (VAT) in other countries.
New GST rates for 2023
Starting from 1st January 2023, the GST rate increase from 7% to 8%; and subsequently, it will increase from 8% to 9% from 1st January 2024 as announced by Singapore’s Minister for Finance. This hike will affect all GST-registered businesses that sell or purchase goods or services that are subject to the standard rate of GST. It is advised that businesses need to plan for the GST rate hike to avoid cash flow difficulties and penalties for non-compliance.
How does Singapore GST work in your business?
When you are operating a GST-registered company, you need to include GST in the prices for the goods and services that you are selling or providing, and then pay the collected GST back to IRAS.
GST usually doesn’t become an expense for the company. The cost of GST is usually passed down to the consumers indirectly, and businesses are just the middlemen collecting GST on behalf of Inland Revenue of Singapore (‘IRAS’)
Example: if your product/service costs $1,000, as a GST register business, you bill your customer $1,080 ($1,000 for your service and an additional 8% GST tax of $80). The $80 is payable to IRAS during the GST tax filing every quarter.
What are the benefits of GST registration
As a GST registered company, you can claim back GST purchases or input tax . This can aid a company in recovering their expenses and lowering cost. It will help to alleviate and recover cash flow pay for GST purchases.
Revenue (overseas) S$100,000 → GST charge S$0
Revenue (Singapore) S$11,000 → GST charge S$880
Rental expense S$30,000 → GST claimable S$2,100
Total GST claim back – S$1,220
What are the cons of registering for GST?
There are also a few disadvantages of registering for GST that includes:
- Having the administrative liability of having to file the GST tax reports every quarter.
- You need to understand the details of GST or pay someone else to do it (usually an accountant).
- Adding GST onto your price tag increases your selling price. Some of your customers won’t be too happy, especially if they are not GST registered in Singapore.
Who is required to register for GST?
GST is a type of self-assessed tax which means you need to monitor whether you need to be registered for GST. If you are unsure whether you need to register GST in Singapore, you can contact us for assistance.
Two types of IRAS GST Registration:
- Compulsory GST registration
Registering for GST is mandatory when:
- Your business turnover is more than $1 million in the past 12 months – this is called the retrospective basis, OR
- You are expecting your business turnover to exceed $1 million in the next 12 months – this is called the prospective basis. This includes if you signed business agreements/contracts that will bring in revenue in the next 1 year.
When revenue exceeds $1 million, you need to submit the GST application to IRAS within 30 days . Should you fail to register GST with IRAS within the deadline, IRAS will backdated your date of registration to the liability date for registration. You will need to compute and pay GST on your prior sales starting from the effective date of registration, even if the company did not charge or collect any GST from customers. Company may face a fine of up to $10,000 and a penalty equal to 10% of the GST payable.
2. Voluntary GST registration
You can voluntarily register for GST even if you don’t need to yet. However, there are additional requirements if you register voluntarily. Once registered, you need to stay registered for a minimum period of two years.
With this, you need to follow all GST regulations, such as filing the GST return on time in every quarter and maintaining all your records for at least five years, even if your company ends all operations.
To register for GST, form GST F1 must be submitted together with all supporting documentation to IRAS. An additional form (GST F3) is required if you are operating a partnership business.
How to register for GST?
Prior for registration, we will discuss with our clients to understand and assess their business, eligibility and type of GST. Our team will walkthrough with you for GST registration process.
Generally for GST registration services in Singapore, you need to provide us the following information:
- Company name and registration number
- Financial year-end
- Type of GST (eg. Compulsory or voluntary)
- Business activity
- Purchases and sales listing for the past 2 months
- Other supporting documents to support GST registration