What businesses need to know about Singapore GST hike
3 minute read
In February 2022, Finance Minister Lawrence Wong announced in his budget speech that the goods and services tax (GST) rate in Singapore will be increased from 7% to 9%. The plan by the government to raise GST will be carried out in two stages – one percentage point on 1 January 2023, then another percentage point on 1 January 2024.
This planned GST hike was first announced in 2018 and was to be implemented in 2021, However, the government decided to delay it as it took several factors into consideration, such as the Covid-19 pandemic and the outlook for inflation.
All GST-registered businesses in Singapore will be affected by the raising of this tax. This article aims to explain everything your business should know to prepare for it.
GST changes | With effect from |
7% to 8% | From 01 Jan 2023 – 31 Dec 2023 |
8% to 9% | From 01 Jan 2024 onwards |
Overview
- When should you change your GST rate?
- Checklist to prepare for the Singapore GST hike
- What if I have a non-GST registered business?
When should you change your GST rate?
The first GST increase comes into force in Singapore on 1 January 2023 in the first of two stages so it’s strongly recommended that you prepare for this change early, to have a smooth transition to the new rate. This might involve – but is not limited to – changing your price displays to take in the new one percentage point increase and modifying accounting and invoicing systems.
Your business should charge taxes at the prevailing rate at the time of supply. You must also account for GST at 8% in your tax return, regardless of whether you have collected this payment from your customers. Failure to account for GST at the right rate may attract penalties.
Transitional rules apply for any supplies that span the GST increase. This is when one or two of the following events take place either partially or wholly on or after 1 January 2023:
- issuance of invoice
- receipt of payment (or making of payment in the case of a reverse charge supply)
- delivery of goods/performance of services
Different rules apply depending on whether your company is a local supplier, an overseas supplier or a reverse charge business. Get the full information from the Inland Revenue Authority of Singapore (IRAS) website.
Checklist to prepare for the Singapore GST hike
Change price display
You must state the new prices on all public price displays in Singapore. This includes price tags, price lists, advertisements and your company website. The public has to be aware of the final purchase price.
However, you might be faced with a situation where you’re unable to change your price displays overnight. It’s possible to display two prices:
- Prices inclusive of GST at 7%, applicable before 1 January 2023; and
- Prices inclusive of GST at 8%, with effect from 1 January 2023.
With the budget announcement by the Singapore government to raise GST, the Committee Against Profiteering (CAP) was set up to ensure that businesses do not use this rate increase as cover to raise prices. It takes a serious view of any unjustified price increases and will investigate all feedback received.
Price-display requirements are laid out in this guide from IRAS.
Update accounting and invoicing system
All your systems that deal with accounting and invoicing should be updated to reflect the new rate.
Update POS billing eg. cash register, receipts
Ensure that all receipts issued to customers reflect the new rate.
Review contracts/agreements with vendors/suppliers/partners
Whether the cost is borne by yourself or another party, update all documents to take in the new rate.
Inform customers of the hike
This can be done through your website, social media accounts or any form of advertising.
Train staff about the planned hike
Everyone working in your company must be aware of the GST rates and the transitional rules. This is so they can apply the correct rate for any sales transactions or reverse charge supplies.
If your business deals mainly with imports and exports, you may apply for the Major Exporter Scheme (MES)
The aim of the MES is to ease cash flow of businesses that import and export goods substantially. Such companies usually have to pay GST upfront on imports, then get a refund from IRAS when they submit their returns. Under the MES, they will be able to import non-dutiable goods with this tax suspended.
You can get more details about the MES here.
What if I have a non-GST registered business?
Your company will still be affected by this new goods and services tax rate as there might be a rise in the cost of everything you purchase from GST-registered suppliers from 1 January 2023, because of their additional GST expenses. So you’ll need to factor in this increase into your budget too as it will affect your revenue.
Non-GST registered businesses can apply for voluntarily GST registration in Singapore, to recover the tax incurred on any expenses. However, you must remain registered for two years so you need to weigh up if it brings you any benefits before deciding to do so. You can find more information here about what you should consider before making this decision.
Let us help you
Many businesses might be pondering how to deal with this announcement from the government and it can be confusing to deal with this rate hike and the impact of the GST. Don’t let this hike take up a lot of your time. Instead, let Sleek handle your accounting and GST filing for you. Contact us for more information.
