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Almost 26 years back, the Goods and Services Tax (GST) was implemented in Singapore. This act has been modeled on the lines of Value Added Tax (VAT) legislation of UK and GST legislation of New Zealand. IRAS (Inland Revenue Authority of Singapore) is designed to act as the agent of the Singapore government administers, assesses, collects, and enforces payment of GST. Introduction of GST is considered as a means to lower corporate and personal tax rates while keeping and maintaining a stable revenue base for the government. GST is an indirect tax because it taxes expenditure. Presently, the rate of GST is 7%. Between 2021 to 2025 (Exact date not confirmed) the GST rate will be raised to 9%.
The article is a complete guide that will provide a detailed insight to the critical concepts of GST in Singapore tax system, and how it relates to the Singapore Companies, definition of GST, advantages, and disadvantages of GST registration, registration requirements, filing GST returns, and schemes to aid businesses.
Goods and Services Tax (GST) in many other countries, also known as Value Added Tax (VAT) is a type of consumption tax that is imposed on the import of goods into Singapore and the supply of goods and services in Singapore. GST is applied as an indirect tax at the rate of 7% to the selling price of the products and services that are offered by the GST registered business entities in Singapore.
If you make any purchases at a supermarket, mall, or at the restaurant, the receipt will usually state that 7% GST is collected. Businesses are required to keep this GST amount with them and remit it to the government on a quarterly basis.
If you are a GST registered business in Singapore, you are required to collect the GST on the products, services, and goods that you provide and pay it to the Singapore tax authorities. For instance, if you are selling a product of yours for S$100 to your customers, you are required to invoice your customer S$107, i.e., S$100 for the product and S$7 as GST. This invoiced GST is then paid to the Singapore Tax Authorities on a quarterly basis via GST tax filing. All companies incorporated in Singapore are not automatically registered for GST. Those companies which have met specific standards and conditions are required to apply for GST registration to IRAS, and only then are they allowed to charge the GST and collect it on behalf of the authorities.
In order not to burdon small companies with GST accounting, the IRAS has given companies with less than 1,000,000 SGD annual revenue, an expemtion from GST registration. These companies are not required to register for GST nor they can charge and collect GST.
The registration for GST is segmented in two categories:
Registering for GST becomes compulsory when
Whenever your business revenue exceeds S$1 million, you are required to register for GST within 30 days. Not doing so within the given time will result in penalties from Singapore tax authorities. There is also an anti-avoidance mechanism in place to ensure that businesses are not manipulating their revenue to keep it under S$1 million, thereby avoid registration.
Even if you are not liable to compulsorily register, you may also voluntarily register for GST, keeping in view the business operations of your company. Your company should have plans to make sales or should have already started making sales in Singapore (on taxable supplies). You should remember that there are additional conditions if you choose to register voluntarily for GST.
On voluntary registration, you are bound to remain registered for at least two years and comply with the GST regulations like maintain all your records for at least five years and filing the GST return on a quarterly basis even after you have deregistered from GST or ceased your business.
If in your business scenario, you pay a lot of GST on input (Purchase) side and if you are not registered for GST then this input side GST will become your cost. If you are in the trading business then this cost can be significant. In this case, you can register for GST voluntarily to get the refund of input GST back.
If your company makes only zero-rated supplies, you can apply for exemption of your company even in case your taxable turnover exceeds the limit of registration. This enables you to escape from GST registration and GST filing. IRAS will grant the permission if;
You are allowed to cancel your registration when;
For de-registration, you must submit the concerned application form within 30 days from the day of cessation to the tax authorities along with the relevant documents.
The tax that you company charges from the customers is called GST. Whereas, the tax you give your supplier is called input tax. So you can offset your GST, by paying to or claiming form the Singapore tax department the difference between the input tax and the GST of your sales.
For example, if in a period you have made taxable supplies worth 100,000 SGD and collected tax on it of 7000 SGD. At the same time, you have also incurred expenses and spend on purchases worth 60,000 SGD and has paid GST on the input side of worth 4200 SGD. Then, in this case, you will pay net 2800 SGD as GST to IRAS.
If your services fall within the scope of Section 21(3) of the GST Act, your services are considered as international services. As per the GST act, international services are zero-rated, which means 0% GST is charged on these services. However, keeping in view the types of services, you may be required to know your customer’s belonging status (local or overseas) before your supply of services can be zero-rated.
It is important to note that all services provided to overseas customers are not zero-rated. International services that are covered under international services are, Advertising Services, Co-location Services (for computer server equipment), International Transport (for Goods and Passengers), Lease or Hire of Transport, Services Performed Completely Overseas, Services Related to Goods for Export and Goods Moving Outside Singapore, Services Related to Land/Buildings/Goods Located Overseas, Services Supplied to Overseas Person, Supplies Related to Ships or Aircraft, Services Related to Electronic System, Services Performed on Goods Stored in a Warehouse under the Specialised Warehouse Scheme, Supplies Related to Air and Sea Containers, Telecommunication Services and Trust Services.
If you perform any services to the overseas company, but the performance of the contract is in Singapore then such services are still GST taxable. For example, an overseas company may engage you to perform market research in Singapore.
If at the point of supply based upon the time of supply for exports, you are sure that the supplied goods will / have been exported and you have the required documents as well, you can charge GST at 0%. The type of exports, where you control the export process and also have the custody of the goods to be exported, are called direct exports, and these can be taken as zero-rated if the required documents are maintained within 60 days. On the other hand, if you do not have the custody of the goods to be exported nor the control of export arrangement, they are called indirect exports. These are considered as local supply and will be charged with GST.
SO technically, of you are arranging a logsitc service provider to take good out of Singapore for delivery then zero rated tax is allowed. But if you are selling goods to anather Singapore based company, which in turn is going to export the goods then charging 0% GST will not be allowed.
Out of scope, supplies are those supplies which do not come under the scope of the GST act. Following are examples of out of scope supplies:
If you are a foreign company, without any presence in Singapore, still you may be subjected to GST registration, if you bring in products or services into Singapore worth more than 1,000,000 SGD in a year. There is a separate procedure for this registration and quarterly reporting.
To take care of cross border transactions in digital economy, IRAS has introduced two new GST measures from 2020. Which are as follows.
From 1 Jan 2020, if you are either:
you will be required to account for GST on all services that you procure from overseas suppliers (“imported services”) as if you are the supplier, except for certain services which are specifically excluded from the scope of reverse charge.
You will be entitled to claim the corresponding GST as your input tax, subject to the normal input tax recovery rules.
If you belong outside Singapore, you are required to register for GST in Singapore if you:
Taxable supplies are levied with GST. The taxable supply is the one that is made in Singapore, other than the exempt supply. So the taxable supply can either be a standard rated (7%) or zero-rated.
Almost all the local good and local services of Singapore are Standard rated.
Zero-rated supplies of goods and services are levied with 0% GST. Export of provisions and goods of international services are mostly zero-rated supplies. Therefore, companies that make zero-rated Zero-rated supplies can claim their input tax, which they have paid on purchases.
There are several assistance schemes offered by Singapore Government with regards to GST. These schemes help create a pro-business environment and ease the cash flow for businesses.
No. Non registered companies are not allowed to charge GST. It is an offense and can be litigated.
No. Goods and services exported for foreign customers are known as zero-rated supplies, and GST tax is not applicable to it.