Goods and Services Tax ("GST") in Singapore
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What is GST?
GST is a broad-based tax on domestic consumption, it is also known as value added tax (VAT) in other jurisdictions. GST is charged to the end customer and the business selling the goods or services is responsible for charging and collecting the tax from its customers, as well as paying the tax to the IRAS. Effectively, the business acts as a collection agent for the IRAS. The tax is applied at the prevailing GST rate. The current rate in Singapore is 7%, although the Government has announced an intention to hike the rate to 9% in the near future.
There are certain exemptions such as the provision of most financial services, supply of digital payment tokens, the sale and lease of residential properties and trading of investment precious metals. GST is also levied on imported goods while export of goods and certain types of services provided to overseas clients are not charged GST.
Who is Required to Register for GST
GST can only be charged by GST-registered businesses. Only businesses that exceed S$1 million in annual taxable turnover are required to be registered. However, companies with revenues below this threshold can voluntarily register as well.
The GST that a business collects from customers is called output tax. Conversely, GST paid on a business' purchases or paid to its suppliers is called input tax. A GST-registered business can claim credit for its GST input tax thereby only paying GST on the amount of value-add, which is calculated as the difference between its output and input tax. This allows companies to lower its cost by claiming credit on its input tax as output tax is eventually passed on to the end customer.
Why should a business voluntarily register for GST?
A business may wish to consider the following:
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Companies are required to register to be a GST-registered business if:
- Retrospective View: the taxable turnover at the end of any calendar year is more than S$1 million
- Prospective View: if any time, the taxable turnover in the next 12 months can be reasonably expected to exceed S$1 million
A company may apply for exemption from registration if;
- The company's proportion of zero-rated supplies over total taxable supplies exceeds 90%
- The company is in a net refundable position had the company registered for GST
A company may not need to register if the company is liable under the Retrospective View but not under the Prospective View due to taxable turnover for the next 12 months projected to not exceed S$1 million, or the taxable turnover is projected to be lower due to specific circumstances such as large-scale down-sizing of business. However, the company should continue to monitor its taxable turnover and have supporting documents to substantiate its projections.
New! GST on Digital Goods and Services
From 1 Jan 2020, 2 new regimes have been implemented to tax imported services. This new measure is targeted at the supply of digital services such as mobile apps, ebooks, software, online newspapers, online music, films, games, supply of online courses, website supply, web-hosting. The two regimes are:
1. the Reverse Charge Regime for Business-to-Business ("B2B") supplies of imported services
2. the Overseas Vendor Registration Regime for Business-to-Consumer ("B2C") supplies of digital services
GST-registered businesses must file a GST Form 5 tax return to IRAS on a monthly or quarterly basis. Even if there are no GST transactions, the business must still file a nil return. In the tax return, companies must report both their input and output tax. If the output tax is greater than the input tax, then the company must pay the net amount to the IRAS. On the other hand, the IRAS owes the company a refund if the input tax is greater than the output tax. Companies must pay the tax to the IRAS within 1 month after filing a Form 5 tax return. The IRAS imposes penalties for late submission and late payment so it is typically worthwhile to get an accounting firm or tax adviser to ensure that filing is accurate and timely!
How Can Sprout Help?
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Bookkeeping + GST Support
Our monthly bookkeeping packages starts from S$80 / month. We'll be able to help you ensure that your GST submissions are accurate and on time. Pricing varies based on the system you use and the number of transactions. Speak to us to get the best value on your bundle!
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Frequently Asked Questions
When must I register for GST?
Companies that have exceeded S$1 million in taxable turnover during the last 12 months are required to register for GST within 30 days from the end of the last quarter when this event occurred.
Companies that expect to exceed S$1 million in taxable turnover during the next 12 months must register for GST within 30 days of such determination.
What are the penalties for late registration?
Businesses that fail to register for GST in time will be subject to a 5% late payment penalty. If the business fails to make payment after 60 days from which the first demand note was issued, another 2% penalty will be imposed for each month that the tax is outstanding. This 2% penalty is subject to a cap of 50% such that the maximum penalty is 55%.
What are the common GST input tax claims which are disallowed?
What is the difference between exempt and zero-rated supplies?
In the case of zero-rated supplies, the sale is still a rated GST except that the applied rate is 0%. The generated revenue will still be included in turnover for the consideration of GST registration and the business can claim credits for the GST paid on inputs. On the other hand, exempt supplies are not subject to GST and the business cannot claim credit for the GST paid on inputs.
Can a business voluntarily cancel GST registration?
It is possible if the business is no longer liable for registration, such as having certainty that the taxable turnover for the next 12 months will fall below S$1 million, or if there is specific circumstances resulting in the decline of business such as loss of major contracts or large-scale downsizing. Supporting documents must be provided to substantiate the projection.
However, if the GST registration was voluntary, the business is required to remain registered for at least 2 years before cancellation.
Should sale of capital assets be included in taxable turnover for GST?
The sale of capital assets should not be included if the business is not in the business of trading capital assets.
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