The Goods and Services Tax (GST) is a consumption tax similar to the Value Added Tax (VAT) in other countries. Implemented in Singapore on 1st April 1994, GST is a consumption tax that is levied on all goods and services consumed in Singapore. When introduced, the initial GST rate was 3%. It has since been increased steadily over the years to the current GST rate, which stands at 7%. The government agency responsible for the administration and collection of the GST is the Inland Revenue Authority of Singapore (IRAS).
How does it work?
GST is structured to be charged to the end consumer of all goods and services. Business that are GST-registered are required to collect GST on behalf of the tax authorities for all goods and services provided by that business. This is done by applying a 7% tax to the final total of the bill. So if a customer purchases $100 worth of product, the business is required to invoice a total of $107 ($100 for the product + 7% GST). The GST collected will subsequently be remitted to IRAS on a quarterly basis through the Quarterly GST Returns.
Which companies are required to register for GST?
GST Registration can be mandatory or voluntary.
Mandatory GST Registration
Mandatory GST Registration is required if your business or company has one of the following:
- Annual turnover of more than SGD$1million for the previous 12 months.
- Anticipated annual turnover of more than SGD$1million for the next 12 months.
Penalties will be levied on businesses that fail to register for GST when they satisfy the above criteria. The authorities will also take action against businesses that intentionally avoid mandatory GST registration.
Voluntary GST Registration
Companies that do not fall under mandatory registration can register for GST voluntarily. This is advantageous because it allows you to offset the GST that your business has incurred as charged by a vendor or supplier. Such GST is called Input Tax. The GST that you charge your customers is called Output Tax. With voluntary GST registration, this allows you to remit only the nett difference between the Input Tax paid and Output Tax collected.
Business and companies that are not GST Registered are NOT allowed to charge GST
GST Registration Procedure
GST Registration is done by submitting the relevant form with any required supporting documents, to IRAS. Processing time is about 3 weeks. Once approved, a Notice of GST Registration letter will be received, containing your GST number, filing process and due dates for the quarterly GST Returns which must be submitted electronically.
Exemption from Registration
Goods and Services for Export are called Zero-Rated supplies. GST is NOT applicable for such Zero-Rated supplies since such goods are consumed outside Singapore. If the bulk of your business involves export items (zero-rated) then you may apply for an exemption even if your annual turnover exceeds SGD$1million. This is allowed because your input tax paid will most certainly exceed your output tax collected.
You are required to submit a GST de-registration on the following events:
- Business winding up or Company is striking-off
- Business is sold to a third party
- Annual turnover falls below SGD$1million.
GST De-Registration application must be submitted within 30 days from the date of cessation.
Government Assistance Schemes related to GST
There are a number of schemes introduced by the government, the aim of which is to help businesses lessen cash flow burdens which may arise because of GST.
- Tourist Refund Scheme
Allows tourists to claim a refund of the GST paid on goods and services purchased in Singapore
- Cash Accounting Scheme
For small businesses with annual turnovers not exceeding SGD$1million.
- Gross Margin Scheme
GST is chargeable on the gross margin of your goods.
- Major Exporter Scheme (MES)
For major exporters who have significant imports.
- Approved Contract Manufacturer and Trader (ACMT)
You are not required to charge GST on goods sold to an overseas customer who instructs you to deliver your finished products to his customers in Singapore.
- Approved Marine Fuel Trader Scheme (MFT)
You are not required to pay GST when you purchase marine fuel oil from a local GST registered supplier.
- Hand Carried Exports Scheme
Your goods are hand-carried out of Singapore via Changi International Airport for an overseas customer. Such goods are zero-rated.
- Zero GST Warehouse Scheme
Warehouses can be applied to be set as Zero-GST Warehouse. This minimizes administration and the GST process is not applicable to such goods.
- Approved Third-Party Logistics Scheme
Allows you to import goods without GST provided the goods belong to you or your overseas principal.