Some Pointers on Goods and Services Tax in Singapore

In Singapore’s tax system, the Goods and Services Tax (GST) is applied at different rates: standard-rated supplies are taxed at 9% (starting from January 1, 2024), while zero-rated supplies are taxed at 0%. This distinction is noteworthy, especially for retail and service businesses, as it affects their operations and strategic planning. Understanding the nuances of GST is essential for these businesses.

To gain a deeper insight into how GST works and how it can affect your business, our article provides a straightforward and detailed explanation, offering valuable information for effective business management.

The concept of Goods and Services Tax in Singapore

As its name hints, Goods and Services Tax (GST) refers to a consumption tax levied on the purchase of goods and services and goods imported into the city-state.

Better known as Value Added Tax or VAT in some regions, GST is an indirect tax, meaning that it is collected and then remitted back to the government by a GST-registered business acting as an intermediary.
GST is divided into input and output taxes.

As a GST-registered business owner, you must understand and manage input and output taxes effectively as part of financial and compliance responsibilities.

When purchasing supplies for business operations, the incurred tax is known as input tax. Subsequently, when customers purchase goods or services, the tax collected from them is referred to as output tax.

Upon filing the GST return, businesses must reconcile the output and input taxes. If the output tax exceeds the input tax, a payment is required to cover the difference, whereas if the input tax surpasses the output tax, a refund may be obtained.

Businesses need to ensure compliance with GST regulations and fulfill the role of intermediaries in collecting and remitting GST on behalf of the government. In Singapore, the rate of GST is currently 9%, according to IRAS.

The requirement for GST registration in Singapore

There are two types of GST registration in Singapore: voluntary registration and compulsory registration.

Compulsory registration

This applies to businesses with annual taxable turnover exceeding SG$1 mil in the past 12 months or expected to exceed within the next 12 months.

Once your company’s taxable turnover reaches more than S$1 million, you are given a time limit of 30 days to file the GST application with IRAS. Any failure to miss this deadline would result in penalties.

Voluntary registration

This is available for businesses with turnover lower than S$1 million. In some cases, voluntary registration can be beneficial for new or small businesses as it allows them to claim input tax refunds.

How to register for GST in Singapore

Once you have decided to register for GST, the steps are fairly straightforward.

• Online application: Apply for GST registration online by using your Corppass account to log into myTax Portal.
• Manual application: Obtain a GST F1 form from any of the 6 Taxpayer Service Centres and mail it back to IRAS.
• Via local agent: Foreign entities who did not register their businesses in Singapore must appoint a local agent to take care of GST matters on their behalf.

Make sure you have all the necessary documents ready before starting the application, which may include:

• Your company’s business profile and details
• Financial statements for the past 12 months
• Expected taxable turnover for the next 12 months
• Other supporting documents required by the IRAS

After registering for GST, businesses are required to file their returns on a regular basis. Late or incorrect filing may result in penalties and fees, so it is important to stay compliant with GST regulations.

Types of supplies exempted from GST in Singapore

You would have to pay GST if you render any goods or services that are labeled as standard-rated supply.

Standard-rated supply is the supply of goods and services that are subject to the standard tax rate. Most types of supplies in Singapore are of this sort.

Yet there are quite a number of categories that are entitled to the exemption from GST, which are:

• Zero-rated supply is any good or service that is charged at the tax rate of 0%. This category of supply comprises exported goods and international services supplied to customers located outside of Singapore. It should be well-noted that not all services provided to foreigners are zero-rated, only services that meet the description of international services under Section 21(3) of the GST Act.
• Exempt supply is exempt from GST, e.g. the sale and lease of residential properties, importation and local supply of investment precious metals (IPM), financial services, exchange of digital payment tokens for fiat currency or other digital payment tokens, provision of loans of digital payment tokens, etc.
• Out-of-scope supply is any good and service that is not subject to GST, and thus need not be reported in the GST return if it falls under any of the following categories:
  • Sale where goods are delivered from overseas to another place overseas
  • Sales Made Within Free Trade Zone/Zero GST Warehouse
  • Private transactions for non-business purposes.

Exemption from GST registration in Singapore

Fortunately, you can seek an exemption from the requirement to register for GST if:

• Zero-rated supplies over total taxable supplies exceed 90%
• The company would be in a net refundable position had it been GST-registered

As soon as you get the seal of approval from IRAS, you are not obliged to GST registration and avoid the process of filing it several times a year.

You can also apply for exemption of GST registration if you qualify for registration under a retrospective basis but you expect to see a significant decrease in sales volume that could result in taxable turnover falling below S1 million in the next 12 months.

Goods and Services Tax deregistration in Singapore

You must cancel the GST registration under any of the following scenarios:

• You stopped selling taxable goods or services, and do not intend to revert in the future.
• Your business has ceased
• The entire business is transferred to a new owner
• There has been a change in the structure of your company (e.g., from a general partnership to a limited liability partnership, or from a sole proprietorship to a private limited company). The next step is to determine whether GST registration is required for the new business entity.

You can also apply for GST deregistration voluntarily if your taxable turnover in the next 12 months is expected to decrease below S$1 million. In such a case, you will be asked to provide supporting documents as proof.

In addition, applying for cancelation of voluntary GST registration would require a business to be remained registered for at least 2 years before deregistration.

Should you wish to file a petition for deregistration, you first need to lodge an application form attached with other relevant documents within 30 days from the date your company halts the collection of GST.

The consequences of failing to file GST in Singapore

Both GST return and payment fall due one month following the end of your accounting period.

If you miss the deadline for making a tax payment, your business would incur a penalty of 5% for the first month of late payment.

Unpaid taxes may be subject to an additional 2% penalty per month, not to exceed 50% of the unpaid amount, if they remain unpaid 60 days after the imposition of the 5% late payment penalty.

If IRAS sees that you are neglecting the duty to file the return, they would notify you of your violation by sending a “Notice of Assessment” with their estimated tax plus a penalty of 5% percent.

A further penalty of $200 would be imposed immediately for the first month of late filing and any subsequent months with outstanding GST returns, which would be accumulated until reaching the $10,000 cap.

Some incentives for Goods and Services in Singapore

Under IRAS, an owner of a company regardless of scope is offered a wide range of GST Incentives Schemes, the purpose of which is to help businesses ease the trouble of excessive red tape and drive growth for Singapore’s overall economy.

• Cash Accounting Scheme: A small business whose annual turnover is less than S$1 million can account for output tax upon receipt of the payment.
• Gross Margin Scheme: For second-hand businesses with no GST input, GST is assessed based on the gross margin instead of the total value of the goods and/or services you render.
• Major Exporter Scheme: Import – Export businesses handling a vast amount of zero-rated goods are allowed to suspend their GST.
• Hand-Carried Exports Scheme: goods that are hand-carried out of Singapore by overseas customers via Changi International Airport can be exempted from GST.
• Zero GST Warehouse Scheme: under certain conditions, a business owner can store their imported non-dutiable goods for as long as he/she pleases in a licensed premise while enjoying GST suspension.
• Discounted Sale Price Scheme: Second-hand or used vehicles can be charged 50% of the selling price for GST purposes.
• Import GST Deferment Scheme: For approved businesses, the GST payment levied on the imported goods can be deferred until the due of filing GST returns instead of paying at the time of importing goods.

Conclusion

As a business owner, understanding the concept and requirements of Goods and Services Tax in Singapore is crucial. By registering and complying with GST regulations, you can avoid potential penalties and effectively manage your tax responsibilities.

Whether it’s compulsory or voluntary registration, make sure to keep track of your input and output taxes to ensure a smooth GST filing experience.

If you need help with GST registration process or setting up your business in Singapore, feel free to contact us at service@bbcincorp.com.

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