This guide provides an overview of the key concepts of Singapore’s Goods & Services Tax (GST) system as it relates to Singapore companies – definition of GST, registration requirements, advantages and disadvantages of GST registration, filing GST returns, and schemes to aid businesses.
The Goods and Services Tax (GST) was implemented on 1st April 1994 in Singapore. The GST Act is modelled off the UK VAT legislation and New Zealand GST legislation. The Inland Revenue Authority of Singapore (IRAS) acts as the agent of the Singapore government and administers, assesses, collects and enforces payment of GST. Introduction of GST is seen as a means to lower personal and corporate income tax rates while maintaining a steady revenue base for the government. GST is an indirect tax as it taxes expenditure. The current rate of GST is 7%.
What is GST?
Also known as Value Added Tax (VAT) in many other countries, Goods and Services Tax (GST) is a consumption tax that is levied on the supply of goods and services in Singapore and the import of goods into Singapore. GST is an indirect tax, expressed as a percentage (currently 7%) applied to the selling price of goods and services provided by GST registered business entities in Singapore.
GST tax is charged to the end consumer therefore GST normally does not become a cost to the company. Businesses merely act as collecting agents on behalf of Singapore tax department.
What does GST mean for a Singapore company?
If you are a GST registered company, you are required to collect GST from your customers for the goods and services rendered by you and then pay the tax collected to tax authorities. For example, if you charged S$100 for your services to a customer in Singapore, you must invoice your customer S$107 (S$100 for your service plus 7% GST). This invoiced GST amount collected on behalf of the tax authorities from the customer must subsequently be paid to the Singapore tax department on a quarterly basis via GST tax filing. Companies incorporated in Singapore are not automatically registered to charge GST. Companies which have met certain conditions have to apply to IRAS to become a GST registered company before the it is allowed to charge and collect GST.
Is my company required to register for GST?
GST is a self-assessed tax and businesses are required to continually assess the need to be registered for GST. GST registration falls into two categories: compulsory registration and voluntary registration.
Registering for GST is compulsory when
- the turnover of your business is more than S$1 million in the past 12 months – known as the retrospective basis OR
- you are currently making sales and you can reasonably expect the turnover of your business to exceed S$1 million for the next 12 months – known as the prospective basis. This includes any agreements / contracts that you have signed and expected revenue for you in the next 12 months exceed S$1 million.
When your revenue exceed S$1 million, you will need to submit the GST application to IRAS within 30 days. Failure to register your business with IRAS within the stipulated time frame will result in penalties. There are anti-avoidance provisions to ensure that entities are not established merely to keep turnovers less than the threshold and thereby avoid registration.
You may also voluntarily register for GST if you are not liable to compulsorily register, depending on your business operations. The business must have plans to do sales or have started doing sales in Singapore (taxable supplies). Please note that there are additional conditions if you choose to register for GST on a voluntary basis
Once you are registered voluntarily, you must remain registered for at least two years and comply with the GST regulations, filing the GST return on time on a quarterly basis and maintain all your records for at least five years, even after your business has ceased and you have deregistered from GST. You may also have to comply with any additional conditions that are imposed by the tax authority.
Exemption from Registration
If you make only zero-rated supplies you can apply for an exemption from registration, even if your taxable turnover exceeds the registration limits. This allows you to escape from the administrative requirement of GST registration and subsequent quarterly GST filing. IRAS will approve the exemption, if more than 90% of your total taxable supplies are zero-rated and if your input tax is greater than your output tax.
You can cancel your registration when your business stops or when your business is sold as a whole to another person or when your sales figures do not exceed 1 million SGD. You must submit an application form, along with other relevant documents to the tax authority within 30 days from the date of cessation.
Is a Singapore company required to collect GST tax?
No. Your company is required to register for GST and collect GST only if its annual turnover exceeds S$1 million or if you have applied to become a GST registered company with IRAS.
When paying GST tax collected from customers, can the Singapore company offset the GST tax charged by its suppliers?
Yes. The GST charged by a company to its customers is known as output tax whereas GST paid by the company to its suppliers is called input tax. What you pay to (or claim back from) the tax authorities is difference between your output and input tax.
If a Singapore company is not GST registered, can it collect GST tax?
No. Non–GST registered businesses are not allowed to charge GST. It is an offence to charge and collect GST if you are not a GST registered businesses.
Must a Singapore company collect GST when exporting goods or services out of Singapore?
No. Export goods and services are called zero rated supplies and GST tax is not applicable.
If a company is not required to register, is it beneficial to register for GST?
It depends. If you are required to register for GST, you have no choice. Otherwise however, you should consider the following pros and cons of GST registration:
To the government:
- It generates a stable and predictable tax income in both good and weak economic environment.
- It is an efficient tax due to the comparatively lower cost of administration and collection.
- It allows the Government to lower corporate and personal income taxes, which in turn encourages more foreign direct investment. This leads to overall economic growth.
To businesses and individuals:
- Most large, established businesses are GST registered – getting your business GST registered is often a signal to customers that your business is an established business and has certain size.
- GST is a fairer tax system. It taxes the self-employed and wage earners only when they spend their money.
- GST taxes apply only on consumption. Savings and investment are not taxed. This will encourage people to save and invest in productive activities.
- Cost of doing business is reduced, thereby contributing to lower prices. Businesses do not suffer a tax cost due to the multi-stage credit mechanism since the real taxpayer is the end-user.
- The disadvantage of GST registration is the administrative burden that comes with discharging the duties and responsibilities of GST registration.
- One must either study the intricacies of GST or pay an accountant to undertake this work which in some cases can be a reasonably high cost.
- Being GST registered effectively increases your selling price by 7%. Your customers who are not GST registered would not be able to recover the GST you charge. So although your costs are reduced because you can recover GST, your customers might not be too pleased.
- GST can be a burden to lower income groups, especially during times of high inflation when the 7% tax is paid on the increasing price of daily essentials.
What kind of goods and services are subjected to GST?
GST is charged on taxable supplies. A taxable supply, is a supply of goods or services made in Singapore, other than an exempt supply. A taxable supply can either be a standard rated (currently 7%) or zero-rated supply.
Most local sales of goods and provision of local services in Singapore are standard-rated supplies.
Zero-rated supplies of goods and services are subject to 0% GST. Exports of goods and provision of international services are mainly zero-rated supplies. A GST registered entity who makes zero-rated supplies is able to claim the input tax paid on purchases.
GST is not chargeable on exempt supplies, of which there are two categories – sale and lease of residential land; and financial services. Input tax incurred in making exempt supplies is not claimable.
Out of scope supplies refers to supplies which are outside the scope of the GST Act. In general, they are:
- Transfer of business as a going concern
- Private transactions
- Third country sales – refers to sale of goods from a place outside Singapore to another place outside Singapore
- Sales made within Zero GST Warehouse
What is GST registration procedure?
A Singapore Goods and Services registration form (GST F1) along with the necessary supporting documents must be sent to the tax authority. An additional form (GST F3), giving details of all the partners must be completed, in the case of partnerships. Separate application procedures/forms are available for overseas companies, group registration and divisional registration. Overseas registrants are expected to appoint a local agent who will act on its behalf and must include a letter, along with the application form, stating the same.
The registration process takes approximately 3 weeks. Upon successful GST registration, you will receive a Notification of GST Registration letter. This letter will contain your GST number, the effective date when your business become GST registered business, your filing frequency and filing due dates as well as any other special instructions. You must file your GST returns electronically.
How to pay, charge and implement GST?
- As a GST registered entity, you are responsible for charging GST on supply of goods and services and remitting the GST charged to IRAS. GIRO payment arrangement via a Singapore bank account is 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.
- As a GST registered trader you must show and quote GST-inclusive prices on all prices displayed, advertised, published and quoted verbally or in writing. Failure to display GST-inclusive prices to the public is an offence and carries a penalty. However, for goods and services subject to service charge (F&B industry), prices displayed may be GST-exclusive.
- When billing customers, a tax invoice must be issued when the customer is a GST registered entity so that the latter can use it as a supporting document to claim input tax on the standard-rated purchases. It contains information on what is being sold and the respective GST charged and can be used to replace a normal invoice. Tax invoices must be retained for at least five years as part of your business records. Note that tax invoices are not required to be submitted along with your GST returns. In general, it is to be issued within 30 days of the time of supply. A tax invoice need not be issued for zero-rated, exempt and deemed supplies or to non-GST registered customer.
- When payment has been made to you, you must issue a serially printed receipt to the payer if a tax invoice or simplified tax invoice has not been issued by you.
- You must keep records of all your business transactions that affect your GST declarations. Additionally, keeping of a GST account (summary of the totals of your input tax and output tax for each accounting period) will facilitate your completion of GST returns.
- You should make your input tax claims in the accounting period according to the date of the tax invoice or import permits.
How to file GST returns?
As a GST registered entity, you are required to submit a return, (GST F5) to the tax authorities based on your accounting cycle, normally on a quarterly basis. In your return, you will indicate the total value of your local sales, exports and purchases from GST registered entities, the GST collected and GST claimed for that accounting period. GST Returns are now filed electronically. Once you have started to e-file your GST F5, your next GST return will be made available online by the end of each accounting period. You can e-file your GST F5 one day after the end of the accounting period. You must ensure that IRAS receives your return not later than one month after the end of your prescribed accounting period. If there is no tax due for the said period, you must still submit a ‘nil’ return. Penalties will be imposed if you file the GST return late. This is regardless of whether the net GST declared is a payable or refundable amount.
You must pay the net GST within 1 month after the end of your prescribed accounting period. Penalties will be imposed if you are late in making the GST payment. GST refunds will usually be made within 30 days from the date of receipt of the return.
Are there any GST Schemes to help businesses?
The Singapore Government has introduced several assistance schemes relating to GST. These schemes generally help to ease the cash flow for businesses and help create a pro-business environment.
- Tourist refund scheme – allows tourists who buy goods in Singapore from participating GST registered retailers to claim a refund of the GST paid if the goods are brought out of Singapore
- Cash Accounting Scheme – specifically for small businesses whose annual sales do not exceed SGD 1 million.
- Gross Margin Scheme – GST is chargeable only on the gross margin of your goods.
- Major Exporter Scheme (MES) – designed to help the cash flow of major exporters who have significant imports.
- 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.
- Zero GST Warehouse Scheme – businesses can transform their warehouses into zero-GST warehouses to minimise red tape and bypass the GST process.
- Discounted Sale Price Scheme – allows you to charge 50% GST on a second-hand / used vehicle.
- Import GST Deferment Scheme (IGDS) – allows you to pay GST on imports when your monthly GST returns are due instead of at the point of importation.
- Other Industry-Specific Scheme – the Government also has various GST schemes for different industries such as marine, logistics, etc.
Are there any industry specific GST guidelines?
Singapore tax department has prepared the GST guides for each industry which provide you with specific information on how GST affects your sector.