This guide provides an overview of how Singapore’s Goods and Services Tax system relates to companies based in the country.
Goods and Services Tax (GST) is a consumption tax in Singapore, which adds to its revenue generation from income taxes.
GST taxes the import of goods, as well as the supply of goods and services in Singapore, and is known as Value Added Tax in some other countries. There are exemptions for certain industries, such as the provision of financial services and the sale and lease of residential properties.
What are taxable and non-taxable supplies in Singapore?
Taxable supplies in Singapore include standard-rated supplies that are taxed at 7% and zero-rated (where 0% GST is applicable) supplies. Goods and services which are sold locally are taxed at 7%. Goods exported and provision of international services are included in zero-rated supplies.
Non-taxable supplies refer to exempt supplies (where GST is not applicable) and out-of-scope supplies (where GST is 0%). Exempt supplies cover the sale and rental of residential properties and financial services, while out-of-scope supplies cover private transactions.
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When does a Singapore company need to charge GST?
GST registration is a legal requirement for any businesses operating in Singapore with a taxable turnover that exceeds S$1 million dollars at the end of a calendar year, or with expected turnover of more than S$1 million within the next 12 months.
You may also need to register under the ‘reverse charge regime’ if your business gets services from overseas suppliers, where you would need to account for GST on the imported services. Another scenario where you’ll need to register is if you are an overseas supplier or a local or overseas electronic marketplace operator that provides digital services in Singapore.
What is Output Tax?
Output Tax is basically the GST that a business charges its customers for taxable goods and services supplied in the course of business. Businesses are to pay their output tax to the Inland Revenue Authority of Singapore (IRAS) after each quarterly accounting period.
How to calculate GST payable for businesses?
Businesses need to pay the net GST to IRAS after deducting the input tax (GST paid on business purchases) from the output tax.
If the net GST is negative (i.e., output tax is less than input tax), this will be the amount to be refunded to you by IRAS.
Registration for overseas entities
The process of registering your company in another country can be difficult and time-consuming, but it is essential to make sure you have all of the correct paperwork. If you are an overseas entity importing goods for supply into Singapore, you have the options of appointing a local agent in Singapore to act on your behalf for all GST matters, or of appointing a GST-registered Singapore agent who will import and supply goods on your behalf.
However, if you are an overseas supplier or overseas electronic marketplace operator, you can register under a separate ‘overseas vendor registration’ regime, without a local agent.
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Benefits and drawbacks of voluntarily registering for GST
Even if you are not required to register for GST, you may still wish to do so so that you can claim the GST on your purchases, should your suppliers be GST-registered. If your turnover is nearing S$1 million, you may also wish to pro-actively register so you won’t have to continuously monitor your turnover. Another consideration is if your customers are generally GST-registered – if they are, you can safely increase your selling price and your customers will be able to claim the GST that you charge.
And if you run a business that is zero-rated – for example exporting goods to overseas customers – you needn’t increase your selling price after GST registration. Since you’ll be able to claim the GST from your purchases, you could potentially earn a higher gross profit.
On the flipside, the drawback of registering is a higher price tag for your customers if they are not GST-registered and unable to claim the GST. You may also incur higher administrative costs in order to fulfil your responsibilities as a GST-registered business.
Should you want to voluntarily register, you will need to take the e-Learning course that fills you in on the details concerning GST, and pass the quiz. You can then submit your application to register. It will usually take 10 working days for your application to be processed.
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How to file GST returns?
You can file your GST returns electronically. As a registered entity, you need to submit your returns via IRAS’ online tax portal within one month from the end of each accounting period. A failure to file GST could result in a fine of up to S$5,000.
How to implement GST?
You can either charge GST on top of your selling price or absorb the tax by treating it as inclusive. Showing the correct prices is an essential part of doing business, and as a GST-registered trader, you must ensure that all advertised or published price tags include the relevant tax rates.
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