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What is the Goods and Services Tax (GST) and how does it work in Singapore
The Goods and Services Tax (GST) is a value-added tax levied on most goods and services sold in Singapore. GST is charged at every step in the production and distribution process, from the manufacturer to the retail level.
GST was introduced in Singapore on 1 April 1994, replacing the existing sales tax. The current GST rate is 7% and it is imposed on all taxable supplies of goods and services made in Singapore by a taxable person, unless specifically exempted.
The GST amount collected by the companies from the customer must be paid to the Inland Revenue Authority of Singapore (IRAS) on a quarterly basis via GST tax filing on the myGST portal on the IRAS’ website. The IRAS acts as the collecting agent for GST, ensuring the correct administration, assessment, collection and enforcement of this tax.
Companies incorporated in Singapore are not automatically registered and allowed to charge the GST. In order to do so, companies must previously apply to the IRAS to be able to charge and collect GST.
The benefits of GST for businesses and consumers
GST is a broad-based consumption tax that helps to raise revenue for the government while keeping Singapore’s taxes relatively low. By spread the tax burden across a wide range of goods and services, businesses and consumers are able to share the tax burden more evenly. This makes Singapore’s tax system more efficient and fair.
GST also helps to keep prices of goods and services stable as it is a hidden tax that is built into the price of goods and services. By having GST, businesses are able to pass on the tax to consumers in the form of higher prices, without having to make sudden and large price adjustments. This helps to keep inflation in check.
How to register for GST and file GST returns
Businesses must register for GST if their taxable turnover exceeds S$1 million in a 12-month period. They can do so by filing the requisite forms with the IRAS. Once registered, businesses will be issued a GST registration number and will be required to file quarterly GST returns.
To file a return, businesses need to log in to the myGST portal on the IRAS website using their SingPass. They will then need to declare their sales and purchases for the relevant quarter, as well as the GST amount collected and payable. Businesses will also need to make payment for any outstanding GST via the portal.
Businesses that do not file their GST returns or make payment by the due date will be liable for late payment penalties.
Visit the website at www.iras.gov.sg.
Exemption from Registration
Small businesses with a taxable turnover of less than S$1 million in a 12-month period are exempt from GST registration. However, they may choose to register for GST voluntarily.
If you are a sole proprietor, partnership or company with annual sales below S$1 million, you can apply for the Voluntary Registration Scheme (VRS) to register for GST. The VRS allows businesses 3 years of voluntary compliance before they are required to mandatorily register for GST.
For companies that handle zero-rated supplies only, there is no need to register for GST as they are automatically exempt from GST. However, these companies may still choose to register for GST voluntarily as well.
Is it beneficial to register for GST even if the company is not required?
There are a few benefits for companies to register for GST even if they are not required to do so.
Firstly, it helps businesses to build up their credibility with suppliers and customers as it shows that they are registered with the IRAS and are compliant with tax regulations. This can make it easier for businesses to obtain loans or lines of credit from financial institutions.
Secondly, companies that are registered for GST can claim back the GST paid on their business expenses. This includes GST paid on office rental, utilities, inventory and other business-related costs. This can help to reduce the overall cost of running a business.
Thirdly, businesses that are registered for GST can issue tax invoices to their customers. This can help businesses to claim back the GST paid on their purchases from suppliers. Tax invoices can also be used as a marketing tool to attract customers.
Lastly, businesses that are registered for GST can apply for the Productivity and Innovation Credit (PIC) scheme. The PIC scheme provides tax deductions and/or cash rebates for businesses that invest in productivity-enhancing technologies or processes.
What goods and services are taxable with GST?
In general, most goods and services supplied in Singapore are taxable with GST. However, there are a few exceptions, such as the sale and lease of residential properties, financial services and certain medical services.
To find out if a good or service is taxable with GST, businesses can check the Schedule of Goods and Services Tax: Rates of Tax. The Schedule lists all the taxable goods and services, as well as the corresponding tax rates.
Zero-rated supplies of goods and services are subject to 0% GST. These include exports of goods and services, and the sale of international services.
Exempt supplies of goods and services are not subject to GST. These include the sale and lease of residential properties, financial services and certain medical services.