The Ultimate Guide to GST & GST Registration for Businesses in Singapore (2023)
5 minute read
What is GST?
GST stands for Goods and Services Tax, is a consumption tax applied to all products and services in Singapore, including the importing of goods into Singapore. It is similar to Value Added Tax (VAT), which is charged in other countries. The Singapore GST rate was previously 7% but recently changed to 8%.
Updated GST rates for 2023
Starting from 1 January 2023, the GST will increase from 7% to 8%; and subsequently, will increase from 8% to 9% from 1 January 2024 as announced during Budget 2022 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. Businesses should prepare for the GST rate hike to avoid cash flow difficulties and the penalties for non-compliance.
How does Singapore GST affect 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 IRAS (Singapore’s tax department).
Example: if your product costs $1,000, you charge your customer $1,070 ($1,000 for your service and an additional 8% GST tax of $80). You then pay this $80 to IRAS with GST tax filing every quarter.
Are there benefits to registering for GST?
Here are some of the benefits you can get for your business as a GST registered company.
- The cost of operating your business goes down resulting in lower prices since the real taxpayer is the consumer and not the business.
- You can establish more legitimacy to customers as most reputable companies are GST registered businesses.
- GST taxes the self-employed workers and wage earners only when they consume, not when they earn. This makes GST a fair system.
- GST does not tax on savings and investments, which helps to encourage people to save and invest more regularly.
- GST that you incur on purchases can be claimed. This can aid a company in recovering expenses and lowering costs incurred.
Example when recovering GST costs:
Receive sales $1,000 → GST Payable $80
Make purchase $100 → GST Claimable $8
Total Net Payable to IRAS = $72
What are the drawbacks to 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 year.
- 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 themselves.
Am I required to register for GST for my company?
GST is a type of self-assessed tax. That means you need to monitor whether you need to be registered for GST. There are two types of GST registrations:
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 your revenue exceeds $1 million, you need to submit the GST application to IRAS within 30 days. Should you fail to register your business with IRAS within the deadline, you will be liable to penalties.
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.
That means you need to follow all GST regulations, such as filing the GST return on time in every quarter and maintain all your records for at least five years, even if your company ends all operations.
To register for GST, you need to submit a form (GST F1) together with all supporting documentation to IRAS. You’ll need to fill out an additional form (GST F3), if you are operating a partnership business.
Exemption from registration
In Singapore, there is a provision for exemption from GST registration. A company can apply with the Inland Revenue Authority of Singapore (IRAS) for exemption if it meets the following criteria:
- It has a negative net balance of goods and services tax collected for supplies versus the tax paid for purchases. This means the company has received a refund from IRAS.
- At least 90% of its total revenue comes from supplies not subject to GST. These exempt supplies are known as zero-rated supplies.
- Out of scope, supplies are supplies that do not fall within the scope of the GST Act.
- Sales made within Zero GST Warehouse.
Companies that are exempted cannot file a claim for the GST incurred on purchases for the business. A business must register for GST if it is expected that it will get a credit for the paid goods and services tax.
GST schemes for businesses
There are several government-run assistance schemes in Singapore when it comes to GST. Such GST schemes are designed to facilitate cash flow for businesses.
- Tourist refund scheme is meant to let tourists claim a refund on goods bought from GST registered Singapore retailers, provided the goods are taken to another country.
- The cash accounting scheme is meant for small businesses with annual sales of less than SGD 1 million.
- Major Exporter Scheme is meant to facilitate the cash flow of major exporters with significant imports.
- Under the Gross Margin Scheme, GST is charged on the gross margin of goods.
- Under the Zero GST Warehouse Scheme, a GST-registered business can transform its warehouse into a zero-GST warehouse to bypass the GST process.
- Under the Hand-Carried Exports Scheme, you are eligible to zero-rate the goods supplied to an overseas customer if the goods are carried from Singapore via Changi International Airport.
- Under the Import GST Deferment Scheme, a business can pay GST on imports when its monthly GST returns are due. That means it does not need to pay GST at the point of import.
How to register for GST
Before registering in Singapore, you should have the following information:
- Name and registration number
- Financial year-end
- Business activities
- Size of the company
- Issued capital
- Paid-up capital
The process involves the following steps:
- Filing a paper or e-application with IRAS for GST registration. Submit online applications on the myTax Portal. Any written applications must be shipped to the physical address of IRAS in Singapore.
- Receiving notification of GST registration from IRAS. The confirmation letter will include – GST Registration Number and Date of registration.
Singapore GST registration requirements
A GST-registered company remains registered for 2 years. When a company is registered for GST, it must charge the tax on supplies at the prevailing rate, excluding relevant supplies subject to customer accounting. This is the output tax paid to IRAS.
On the other hand, input tax is the GST incurred on business purchases and expenses. A business that meets the criteria for claiming input tax is eligible to claim input tax on the purchases and expenses.
This means that only the value added is taxable at each stage of the supply chain.
All GST-registered companies must levy GST and file returns when:
- Their total taxable turnover exceeds S$1m for 12 months. That means the total value of all taxable supplies in Singapore exceeds S$1m in that quarter as well as the previous 3 quarters. However, if the value of taxable supplies is not expected to be less than S$1m in the next 4 quarters, there is no need for GST registration.
- Their taxable turnover is expected to exceed S$1 million in the coming 12 months.
- For periods on or after 1 Jan 2019, taxable turnover will be computed on a calendar year basis for the purpose of determining registration liability. You have to monitor at the end of every calendar year (i.e. 31 Dec) and register for GST if your annual taxable turnover exceeds S$1 million. You are encouraged to use the GST Registration calculator (from 2019) to assist you in determining your GST registration liability.
How Do You Pay for GST?
A GST registered business must quote GST-inclusive prices on its displayed, verbally quoted, published, or advertised prices. A business that fails to display GST-inclusive price will be faced with a penalty.
When billing customers, a business must issue a tax invoice when the customer is registered for GST. This enables the customer to use it as a supporting document for filing a claim for input tax on its standard-rated supplies. The document comprises information on the product being sold along with the GST charged.
The tax invoice is not required for submission along with GST returns. Typically it should be issued within 30 days since the supply time. Additionally, a GST-registered business is not required to issue a tax invoice for deemed, zero-rated, and exempt supplies.
It is important to keep all records of your business transactions related to GST. Make your claims on input tax during the accounting period as per the date of the tax invoice.
As a GST-registered Singapore company, you should submit a GST return based on your accounting period. The business must start collecting GST from the effective date of registration.
Filing GST Return
A GST registered company must file an F5 tax return. If the company does not have any GST transactions during the period, it must file a nil return.
The tax money must be paid to IRAS within 30 days after the return is filed. It is important for a GST-registered business to report input and output tax. While filing an F5 return, the business should compute its net GST. Subtracting output GST from input GST gives the net GST figure.
GST refund in Singapore
If companies incur more expenses than revenue initially, the company can claim GST refund if it is registered with the IRAS.
Businesses in the export business may claim GST on expenditure. However, exports will be categorised as zero-rated supplies under the GST scheme. As a result, they can claim a GST refund in Singapore.
There is a tourist refund scheme for Singapore tourists who make purchases from participating GST registered retailers. Under the scheme, they can claim a refund of the GST paid on the goods carried out of Singapore.
When can I get the GST Voucher 2023?
According to the Ministry of Finance (MOF) of Singapore, eligible Singaporeans will get up to S$700 in cash in January 2023. This is part of plans to help citizens deal with the GST increase and rising living costs.
Under the Assurance Package, about 2.9 million adult Singaporeans will get up to S$200 in cash, and about 2.5 million will also get up to S$500 in cash as part of the Cost-of-Living (COL) special cash payout. Payments will be made all at once.
The one-time COL special payment is part of the S$1.5 billion Support Package that was announced in October 2022 by Deputy Prime Minister and Minister for Finance Lawrence Wong to help Singaporean households.
It will be given to Singaporeans over 21 with an assessable income of less than S$100,000 in the Year of Assessment (YA) 2022. They can’t own more than one home, either.
The amount paid out will be anywhere from S$300 to S$500, depending on the person’s income that can be taxed.
They would be paid out in these channels:
- Direct crediting to your savings/current bank account (fastest)
- Cheque (may take 15 days)
- GST Voucher − Cash can be credited only at a local UOB, OCBC, DBS, or POSB bank
- Be a Singaporean residing in Singapore
- Be aged more than 21 years
- Be an owner of not more than one property
- 2017 income as per the IRAS assessment
- Annual Value of Home or probable annual rental of property by 31 December 2018
What is GST used for in Singapore?
Goods and Services Tax, or GST, is a tax that Singapore puts on the sales of goods and services. The government uses it to bring in money and pay for public services and programs. Most goods and services are taxed at a standard rate of 7%, but some essential items are exempt. People “pay” GST when they buy goods and services, and businesses must collect the tax and send it to the government.
Who gets to benefit from the GST?
The Goods and Services Tax (GST) in Singapore is a sales tax that applies to most goods and services sold in the country. This means that the people who buy these goods and services are the ones who get the most out of the GST. When businesses charge and collect GST on their taxable goods and services, the government uses the tax money to pay for public services and programs that help everyone in the long run.
How do I calculate GST?
In Singapore, you can use the following formula to figure out how much GST you have to pay on a taxable good or service:
GST amount = Taxable value x GST rate
If the GST rate is 8% and the taxable value of a good or service is $100, then the GST amount would be $100 x 8/100 = $8.
Then, you can add the GST amount to the taxable value to figure out how much you need to pay in total, including GST. In this case, the total would be $100 plus $8, which is $108.
The GST rate in Singapore is currently set at 8%, which is vital to know. But some goods and services are exempt from GST or have a lower GST rate, so it’s best to check with the supplier or IRAS to find out how GST applies to a particular type of good or service.
Don’t fall foul of your IRAS obligations once you register GST for your business – we can help you with the process. Our team is available to chat. Simply fill out our contact us form and we’ll get in touch.