What is GST?
GST stands for Goods and Services Tax, which is a broad-based consumption tax levied on the supply of goods and services in Singapore, as well as importing of goods into Singapore. In other countries, GST is known as the Value-Added Tax or VAT.
GST Rates
- Standard-Rated Supplies: Most goods and services are subjected to GST at the standard rate (currently 9% from 1 January 2024).
- Zero-Rated Supplies: Exported goods and international services are zero-rated, meaning they are taxable but the rate is 0%.
- Exempt Supplies: Certain financial services, sale and lease of unfurnished residential properties, and the importation and local supply of investment precious metals are exempt from GST. Digital payment tokens have also been included into this list from 1st Jan 2020. GST is not applicable.
- Out of scope supplies: Sale where goods are delivered from overseas to another place overseas. GST is not applicable.
GST Registration
Businesses with a taxable turnover exceeding S$1 million in a calendar year must register for GST. Businesses must apply to be registered within 30 days of the date when the liability arises.
If your business taxable turnover is less than S$1 million, you may still choose to voluntarily register for GST after careful consideration.
You may also be liable for registration:
- under the reverse charge regime if your business procures services from overseas suppliers or imports low-value goods and your business is not entitled to full input tax credit even if it is GST-registered, or
- under the overseas vendor registration regime if you are an overseas supplier or a local/ overseas electronic marketplace operator or redeliverer that provides services (digital and non-digital) or supplies imported low-value goods to individuals and businesses in Singapore that are not registered for GST.
Voluntary GST Registration
You may voluntarily apply to be GST-registered even though it may not be compulsory for you to register for GST. To qualify, you must satisfy any of the following:
- Your business makes taxable supplies
- Your business only makes out-of-scope supplies, which are sales of goods that do not enter Singapore, and goods in transit
- Your business makes exempt supplies of financial services that are also international services; or
- Your business procures services from overseas service providers or import low-valued goods and you may not be entitle to full input tax credit even if you were GST-registered
You may also apply for voluntary GST registration if you have not started any of the above transactions, but intend to do so in future.
You will have to satisfy the Comptroller that you are operating or carrying on a business, and have firm intentions to carry out the above transactions.
As a voluntarily registered businesses, you must remain registered for 2 years. Hence, you should assess the costs and benefits over a 2-year period before making the decision to register for GST.
If you do not have firm intentions or plans to carry out any of the above transactions, you should NOT apply for GST registration.
Advantages of GST Registration
- Credibility – A GST registered company in Singapore has enhanced credibility and signals compliance with tax regulations. This can enhance your reputation among customers, suppliers, and other stakeholders.
- Input tax credit – One of the key benefits of registering for GST is that you can claim credit for taxes paid on purchases against those collected on sales. This can result in significant cost savings and improved cash flow management for your business.
- Compliance with regulations – GST registration ensures that your business remains compliant with Singapore tax laws. By adhering to GST laws, businesses can steer clear of legal issues and financial penalties. This not only offers a peace of mind but also boosts overall business efficiency.
- Government contracts – GST registration can provide an advantage when competing for government contracts and tenders, which often require GST registration. GST registered suppliers would also prefer to do business with you.
- Global markets – For businesses aiming to enter international markets, GST registration can be essential. Many countries mandate GST registration for participating in cross-border trade. With GST registration in Singapore, your business can streamline export and import activities, removing potential obstacles to accessing foreign markets.
- Better Financial Management – Regular GST filings and compliance help businesses maintain accurate financial records, aiding in better financial management and planning.
Disadvantages of GST Registration
- Increased Administrative Costs – regular filing and maintenance of records such as GST returns are required to be done.
- Cash Flow Management – businesses have to be sharp and aware of how much GST must be collected on taxable supplies, especially when payments from customers are delayed. There might be a possible time lag between the payment of GST and receiving the input tax credit which must be taken into account as it will impact cash flows.
- Compliance Costs – engaging accountants, tax professionals, or even investing in accounting software can be costly and add onto the operational and maintenance costs to run the company.
- Complexity in Implementation – businesses need to stay updated with the latest changes in rules and guidelines, especially with regards to the GST Act and its regulations.
- Risk of Penalties – Penalties, fines and scrutiny can all result from failure to comply with regulations or mistakes in GST filing.
Responsibilities of a GST-Registered Business
As a GST-registered company in Singapore, you are responsible for the following:
- Issuing Tax Invoices: You must provide GST-compliant tax invoices for all taxable transactions, clearly stating the GST amount.
- Collecting GST: You are required to collect GST on taxable supplies, ensuring the correct rate is applied.
- Filing GST Returns: Regular filing of GST returns to the Inland Revenue Authority of Singapore (IRAS) is mandatory, typically on a quarterly basis. This involves reporting GST collected and GST incurred.
- Paying GST: Based on your GST returns, you must remit the net GST amount (GST collected minus GST claimed) to IRAS by the specified deadlines.
- Maintaining Records: You are obligated to keep comprehensive records of all business transactions, GST invoices, and receipts for a minimum of five years, and these records must be available for IRAS inspection if required.
- Claiming Input GST: You are entitled to claim input GST on purchases and expenses related to taxable supplies, provided proper documentation is maintained.
- Adhering to GST Regulations: It is essential to stay updated on GST regulations and ensure compliance with all relevant laws and guidelines issued by IRAS.
- Processing GST Refunds: You must issue GST refunds to customers as necessary, such as for returns or adjustments.
Adhering to these responsibilities ensures compliance with GST regulations and facilitates efficient business operations.
Conclusion
GST registration services offer numerous advantages that can significantly benefit businesses in Singapore, enabling them to thrive and succeed. These benefits range from ensuring compliance with tax regulations to supporting global expansion.
By utilizing professional GST registration services from a trusted provider like P & W Consulting, businesses can effectively leverage these advantages and navigate the complexities of taxation.
Contact us today to find out more.
