The introduction of the Goods & Services Tax (GST) in Singapore has led to lower corporate and personal income tax rates, and also delivered a steady stream of revenue for the government. But many business owners are still unsure if they need to register and what’s involved.
Here we take a brief look at GST, the reasons for registering, and answer some frequently asked questions.
This guide covers:
- What exactly GST is;
- What it means for Singapore companies;
- The types of registrations, and exemption;
- A few hand-picked GST FAQs;
- The upsides and downsides to registering;
- And a glance at the registration and filing process.
Firstly, what is GST?
GST stands for Goods & Services Tax. It’s a consumption tax levied on the supply of goods and services in Singapore, and on the import of goods into Singapore. GST is also known as Value Added Tax (VAT) in many other countries around the world.
GST is an indirect tax. This means it’s applied to the selling price of goods and services provided by GST-registered businesses. The current rate is 7%.
The tax is charged to the end consumer and is not normally a cost to the company. Businesses simply collect the tax on behalf of the Singapore tax department.
What does it mean for a company in Singapore?
If your company is GST-registered, you are required to collect GST from your customers for the goods and services you provide. You must then pay the tax collected to the tax authorities on a quarterly basis via GST tax filing.
For example, if you charge a client S$1,000 for your product or service, you must invoice them S$1,070 (the cost plus 7%).
Companies incorporated in Singapore are not automatically GST-registered. Certain conditions must be met (more on those below) before you are allowed to charge and collect GST.
What types of goods or services are subject to GST?
- GST is charged on taxable supplies.
- A taxable supply is a supply of goods or services made in Singapore.
- A taxable supply can be either a standard-rated (7%) or zero-rated supply.
Most of the sales of goods and services in Singapore are classified as standard-rated supplies.
Zero-rated supplies, on the other hand, are subject to 0% GST. The export of goods and services are by and large zero-rated. Any GST-registered company making zero-rated supplies can claim the input tax paid on purchases.
Types of registrations, and exemption
Goods & Services Tax is self-assessed, and businesses are required to continually assess the need to be registered for GST.
As such, registration falls under two categories: compulsory and voluntary.
You must register for GST if:
- Your business turnover is more than S$1 million in the past 12 months. This is known as the retrospective basis.
- Or, if you are currently making sales and you can reasonably expect your turnover to exceed the S$1 million mark for the next 12 months. This is known as the prospective basis.
When your revenue exceeds $1 million, you have 30 days to submit the GST application to the Inland Revenue Authority of Singapore (IRAS). Failure to do so will result in penalties.
You can also volunteer to register for GST. To do so, your business must have plans to sell or have started to sell taxable goods or services in Singapore.
Once you have registered voluntarily, you must stay registered for at least two years, complying with all GST regulations and filing the GST return on time each quarter. Records must be maintained for at least five years, even if your business has ceased trading and you have deregistered from GST.
You can apply for exemption from GST registration if you make only zero-rated supplies, even if your taxable turnover exceeds the S$1 million threshold.
IRAS will approve the exemption if more than 90% of your total taxable supplies are zero-rated, and if your input tax is greater than your output tax.
A few GST FAQs
Q. Are all companies in Singapore required to collect Goods & Services Tax?
No. A company is only required to register for and collect GST if its annual taxable turnover exceeds S$1 million.
Q. If a company is not GST-registered, can it collect Goods & Services Tax?
No. Non-GST-registered companies are not allowed to charge their customers GST.
Q. Can the amount of GST collected from customers be offset by the GST charged by suppliers?
Yes. The GST charged to customers is called the output tax. The GST charged by suppliers is called the input tax. What you pay to (or claim back from) the Singapore tax authorities is the difference between the output and input tax.
Q. Does a company need to collect GST when exporting goods or services out of Singapore?
No. GST does not apply to export goods and services.
Q. Are there industry-specific GST guidelines?
Yes. They can be found here.
Q. If a company doesn’t need to register for GST, is it beneficial to do so?
Sometimes! It really depends. If you’re not required to register, you should at least consider the following advantages and disadvantages of GST registration…
The upsides and downsides of GST registration
- It provides your business with a sense of scale. Large and established businesses are GST-registered, and if yours is too, it can give your customers confidence that they’re dealing with a big company.
- The cost of doing business is reduced. This, in turn, contributes to lower prices.
- There’s a greater onus placed on admin. However, with more responsibilities, it makes sense to outsource GST filing to an expert (like Stepping Stone!).
- Prices are effectively increased by 7%. Customers who aren’t GST-registered cannot recover the GST you charge. This may put prospective customers off.
What is the GST registration process?
The short answer is that a Singapore Goods & Services registration form must be sent to the tax authority, along with all of the necessary supporting documents.
In the case of a partnership, an additional form detailing all of the partners involved must also be completed and submitted. There are also separate processes for overseas companies and group and divisional registration.
The registration process can take around three weeks. If you are successful, you’ll receive a Notification of GST Registration letter. This will contain:
- Your unique GST number;
- The date at which your company became a GST-registered business;
- Your filing frequency;
- And your filing due dates (you must file electronically).
Filing a GST return
As a GST-registered business, you‘re required to submit an online return on a quarterly basis.
The return has thirteen boxes, and will indicate:
- The total value of your local sales, exports, and purchases from GST-registered businesses;
- And the GST collected and the GST claimed for the accounting period in question.
You must make sure that IRAS receives the return no later than one month after the end of your prescribed accounting period. Even if there’s no tax due, you must submit a return. You’ll face penalties for filing your GST return late, regardless of whether you owe tax or are owed a refund.
If you owe tax, you must pay it within one month after the end of your prescribed accounting period. If you’re owed a refund, you can expect to receive it around 30 days from the date of the receipt of the return.
Ready to register, or need some help? Ask Stepping Stone!
Stepping Stone can help you decide if you need to register and guide you through the entire process. And if you’re already GST-registered, we can handle the admin and filing so you can focus on the most important task of all – running your business.