Everything You Need to Know about the Goods and Services Tax (GST)
Businesses in Singapore often have questions about the Goods and Services Tax (GST) because they hear a lot of conflicting information about what it is.
In this article, we’ll clarify the confusion surrounding this topic. We’ll discuss what the GST is, when you need to register for it, if you can voluntarily register for it, the advantages and disadvantages of voluntary registration, and the responsibilities of GST-registered businesses.
What is GST and how is it Relevant to my Business?
The Inland Revenue Authority of Singapore (IRAS) defines the GST as a “broad-based consumption tax levied on the import of goods (collected by Singapore Customs), as well as nearly all supplies of goods and services in Singapore.”
In short, GST is a form of tax incorporated into the price of goods and services in Singapore.
GST registered businesses must include GST (charged at a rate of 7%) into the prices of their products and services. They’re also eligible to claim GST credits back on the products and services purchased under business expenses.
What Supplies are Exempted from GST?
GST exemptions apply to the provision of most financial services, the supply of digital payment tokens, the sale and lease of residential properties, and the importation and local supply of investment precious metals.
When does a Business Need to Register for the GST?
Starting from 1 January 2019, businesses in Singapore must register for the GST if the value of their annual taxable turnover at the end of each calendar year (ending 31 December) is greater than $1 million. This is known as the retrospective view.
You also must apply if you know that your taxable turnover will be more than $1 million in the next 12 months. This is known as the prospective view.
You must present documentation to support the claim that your business will generate more than $1 million in taxable turnover in the next 12 months. These documents may include the following:
- Invoices to customers.
- Signed contracts.
- Confirmed purchase orders.
- Past income statements show that the annual turnover for the past 12 months is close to $1 million and is on an increasing trend.
Who is Exempt from GST Registration?
Companies that produce only zero-rated supplies can apply for an exemption from registration, this is still possible even in the case where your taxable turnover exceeds the registration limits. This allows you to avoid the administrative requirement of GST registration and subsequent quarterly GST filing. If more than 90% of your total taxable supplies are zero-rated and if your input tax is greater than your output tax, the exemption will be approved by IRAS.
Can I Voluntarily Register for the GST?
You can voluntarily apply for the GST if your business qualifies for it. To do so, IRAS states that you must satisfy one of the following criteria:
- Your business makes taxable supplies.
- Your business only makes out-of-scope supplies (Out-of-scope supplies refer to sales of goods in transit and those that didn’t enter Singapore).
- Your business makes exempt supplies of financial services that are also international services.
- Your business procures services from overseas service providers (you would not be entitled to full input tax credit even if you were GST-registered).
Since you’re voluntarily applying to become a GST-registered business, you also have to show that you understand the obligations and responsibilities of this status. IRAS requires either the company director, sole-proprietor, partner, trustee, or preparer of the GST returns (whichever is applicable) to complete and successfully pass the two e-learning courses “Registering for GST” and “Overview of GST”.
What are the Pros and Cons of Voluntary Registration?
If your company’s suppliers are mostly GST registered, you will be at a disadvantage if your company is not GST registered. This is because you will not be able to charge GST on your products or services.
If your company does not procure goods and services from GST registered companies and are not required to register for GST, voluntary registration for as a GST registered company will incur additional administrative costs (such as costs for registration and filing).
What are the Responsibilities of a GST-Registered Business?
The main responsibilities of a GST-registered business are the following:
- Charge and account for 7% GST for goods and services made in Singapore
- File for and pay GST tax due. You must file GST returns and pay GST within one month of the end of each accounting period. Keep accurate business & accounting records for at least 5 years, even after the business no longer operates or has been deregistered from GST.
- Ensure that your price displays, advertisements, publications, or quotations regarding goods and services for sale always include GST. Failure to do this can make your business liable for a fine of up to $5,000.
- Always notify IRAS of any change to your business situation within 30 days of the change.
How to File GST Returns for Your Company
GST Returns are now filed electronically. As a GST registered entity, you are required to submit a return (GST F5) on a quarterly basis to the tax authorities based on your accounting cycle. When filing your return, you will indicate the following:
- Total value of your local sales
- Total value of Export Sales
- Purchases from GST registered entities
- GST collected for that accounting period
- GST claimed for that accounting period
Once you have started to e-file your GST F5, your next GST return will be made available online by the end of each accounting period. You can e-file your GST F5 one day after the end of the accounting period, whilst it is also possible to e-file your return within one month of your prescribed accounting period but no later, regardless of whether the net GST declared is a payable or refundable amount. However, even if there is no tax due for the said period, you must still submit a ‘nil’ return.
In order to be eligible to deregister your company, you can do so when your business stops its existing operations or when your business is sold (as a whole) to another individual or when your sales figures do not surpass 1 million SGD. To deregister your company, you must submit an application form with other relevant documents to the tax authority no more than 30 days from the date of cessation.
Reach Out to Sprout
Still unsure how to deal with your GST situation? Contact us to carry out a complimentary consultation to get your queries answered within 24 hours. Sprout also offers professional services with our budget friendly packages to help with the GST registration, GST filing and monthly bookkeeping for your company.
Frequently Asked Questions
Q: What is my GST Number?
A: Your company UEN is your GST Number.
Q: What happens if you don’t file GST?
A: If you don't file any GST return then subsequent returns cannot be filed. For example, if GSTR-2 return of August is not filed then the next return GSTR-3 and subsequent returns of September cannot be filed. Hence, late filing of GST return will have a cascading effect leading to heavy fines and penalties.
Q: Is GST applicable in Singapore?
A: GST is charged on all sales of goods and services made in Singapore, except for exported goods, international services and exempt supplies.
Q: How long is the processing period to be registered for my GST application?
A: The Inland Revenue Authority of Singapore (IRAS) usually takes 10 working days to process your GST application.
Q: Can I claim GST for my purchases incurred before I am GST-registered?
A: Yes and No. You can claim GST for purchases incurred before GST registration for up to 6 months before registration. However, there are certain requirements of what is and is not claimable. You can claim for unsold goods and inventory purchased within 6 months before GST registration. You cannot claim for intangible items such as cleaning services incurred before GST registration.