Singapore’s GST is currently 7%, and we are only two months away from the first GST rate change. With effect from 1 January 2023, Singapore Goods and Services Tax (GST) will be raised from 7% to 8%. The Inland Revenue Authority of Singapore (IRAS) encourages all GST-registered businesses to prepare early for a smooth transition to the new GST rate.
GST rate changes
In Budget 2022, the Minister for Finance announced that the Goods and Services Tax (GST) rate would be increased in two steps:
- From 7% to 8% with effect from 1 January 2023
- From 8% to 9% with effect from 1 January 2024
Preparing for the GST rate changes before 2023
These are the three main things you need to do:
- Update your systems to incorporate the new GST rate. Examples of systems include accounting and invoicing systems, retail management systems, and cash register and receipt systems for point-of-sales billing. You are encouraged to approach the vendors of your plan early, as system changes may take time to implement.
- Change your price displays to reflect the new GST rate. If you cannot change your price displays overnight, you may display two prices: (i) prices inclusive of GST at 7% applicable before 1 January 2023; and (ii) prices inclusive of GST at 8% on or after 1 January 2023.
- Understand the rate change transitional rules and train your staff on the correct application of the rules.
How To Apply The Transitional Rules
If your business has transactions that straddle 1 January 2023, you will need to familiarise yourself with the rate change transitional rules to ensure that you charge the correct GST rate.
As a general rule, the reference date for correct pricing is the time of supply. GST should be charged at the prevailing rate based on the time of supply rules. If the time of supply is triggered before 1 January 2023, GST should be set at 7%. If the time of supply is identifiable on or after 1 January 2023, the rate of 8% must be applied.
If the time of supply intersects with the date of the GST rate change, transitional rules exist to determine which rate must be applied.
For example, when an invoice for goods is issued before 1 January 2023 but the goods are delivered, and full payment is received after 1 January 2023, GST must be calculated at the new rate of 8%. This is because payment and delivery occur after the rate change.
However, when services are fully performed before 1 January 2023, but invoices are issued after 1 January 2023, businesses can elect to charge GST at 7%. This is because the services have been fully performed before the rate change.
Also, in the case of services performed before 1 January 2023, with invoices and payments happening after the same date, the rate to be applied is under the discretion of the business (either 7% or 8%).
For additional clarification on the rise in GST and assistance in performing an analysis on the GST treatment of transactions that straddle the GST rate change, feel free to contact us.
To find out more about GST registration in Singapore, please refer to our article , GST Registration in Singapore.