Singapore Goods and Services Tax (GST) Guide
1 April 1994, marked the beginning of a new era of the tax system in Singapore by introducing highly commendable Goods and Services Tax Singapore. GST is basically the tax levied by the government of Singapore on all the import of goods into Singapore and the supplies of goods and services in the country. As of 2013, GST in Singapore stands at 7% and is maintained even in the recent Budget 2015.
Goods and Service Tax (GST), also known as Value-Added Tax (VAT) in a few countries, is a new type of tax system, governed by the IRAS (Inland Revenue Authority of Singapore). GST was initially introduced with an aim to reduce the burden of paying corporate and personal income taxes. Apart from that, GST also plays an important role in maintaining a steady flow of revenue for the government. Initially in 1994 the rate of GST was 3%, it was then increased to 4% in 2003, next revision of 5% was introduced in 2004 and in 2007 the same GST rate was revised to 7%. Since then the rate of GST in Singapore, stands still at 7%.
What is GST?
Goods and service tax Singapore, in reality, is a consumption tax levied on import of goods in Singapore as well on the supply of all kinds of goods and services in Singapore, unless exempt or zero-rated. GST is nothing but an indirect tax, which is expressed as a percentage. In Singapore, GST is levied at the rate of 7% of the selling price of goods and services. The end-user is usually the ultimate payee of GST. Thus, GST never becomes or behaves as a cost to the company. On the contrary, businesses just act as the tax collecting agents on behalf of the Singaporean government.
GST for a Singapore Company
A GST registered company incurs goods on services tax on supplied or sold goods and services by charging 7% extra in the initial cost of the goods and services. For example – if a company charges S$100 for a service in Singapore, then it has to prepare a final bill of S$107 (including GST). The GST amount thus collected from customers is then passed on to the concerned tax authorities in Singapore. As per the ACRA and IRAS guidelines, all Singapore companies are mandated to file GST Singapore tax returns on a quarterly basis.
Goods and Services Tax: To Register or Not
GST registration is more of a self-assessed process. The companies need to constantly assess the parameters, and register for GST Singapore whenever applicable. They can also opt for GST as a matter of choice, even when they do not fall into the registering specifications. For the matter of convenience, GST registration falls in two categories – compulsory and voluntary.
It becomes compulsory for the businesses to register for GST when-
- The turnover of the business has been more than 1 million SGD for the last 12 months
- Expected turnover of the business will be more than 1 million SGD for the next 12 month
A company can register voluntarily for GST when-
- The annual turnover of the business has not been more than 1 million SGD
- The supply of goods is done out of Singapore
- Exempt supplies of financial services is made which is also deemed as international services
Voluntary GST registration Singapore provides the benefits of claiming input tax incurred in the course of the business. This remains especially true in case of zero-rated supplies. If in the case, a business only provides zero-rated supplies, they can opt for exemption from registering for GST. Even when the turnover exceeds the registration cutoff.
Companies can even opt out of GST registration. However, this can happen only when the said business stops or sold-off to another person. Secondly, when the sales figure dips to less than 1 million SGD. The businesses are required to submit an application form along with other relevant documents.
The money paid as Singapore GST to the suppliers can offset the money collected as GST from the customers. What the business collects from the customer is known as output tax, and what it gives to its suppliers is known as input tax. Therefore, what the business pays or claims back from the authorities is the difference between the output and input tax.
Pros and Cons of Registering for GST
PROS – For the Government:
- GST ensures a stable and predictable inflow of revenue, which especially is very important for weaker economies.
- Administration and collection of GST Singapore is relatively easy, which makes it an efficient tax system
- Introduction of GST eventually brings about a reduction in the rates of corporate and personal taxes. This in turn promotes an environment for foreign direct investment.
For Businesses and Individuals:
Normally only bigger companies with above average turnover are motivated to participate in the Singapore GST registration process. This specific requirement implies that the said business is of certain qualifying standards and the same impression is reflected on customers.
- GST is a fair tax system imposing taxes on people only when they are spending money.
- GST is levied on consumption or utilization of services. Savings and investment do not come under GST’s influence.
- GST brings about a decrease in the cost of doing business, because the real taxpayer is the end-user.
GST registration Singapore brings in additional duties and responsibilities, which calls for extra administration duties.
- An accountant needs to be hired to understand the intricacies of GST.
- If a supplier is GST registered, his selling price will increase by 7%. However, if his customer is not GST registered, then he will have to pay the extra amount, and will not be able to claim it. This can prove harmful for the supplier, since he might lose a customer.
- Customers representing lower income groups are more often the sufferers, as they have to pay extra 7% charge against the initial price of the purchased goods or services.
Types of Goods and Services Subjected to GST
GST is always charged on taxable supplies. Goods and services that are made in either Singapore or are imported into Singapore imply the exact meaning of taxable supplies. These taxable supplies are again divided into two major categories standard rated and zero-rated.
The goods and services sold locally fall under the umbrella of standard-rated supplies. While, those that are exported fall under zero-rated supplies. The manufacturer of export goods is able to claim the input tax levied on purchase of inputs.
The exempt supplies is another category on which the Singapore GST is not charged. For example, sale and lease of residential land and financial services are business activities that are exempt from GST. The main difference between the zero-rated supplies and the exempt supplies is that the exempt supplies cannot claim the input tax.
Last are the out-of-scope supplies. These are the supplies, which are out of the scope of the GST. The ones included in the out-of-scope supplies are the ones which-
- Carry out private transactions
- Carry out sales of goods outside Singapore to a another place outside Singapore
- Carry out sales within zero-GST warehouse
Process of GST Registration Singapore
There are various types of forms that need to be filled by the companies, who want to be registered for Singapore GST. GST F1 is a form that should be duly filled, and sent to the tax authorities. If the business entities comprise of partnerships, an additional form (GST F3) should be provided. This would give the details of all partners involved in running the business.
Similarly, different types of forms are available for overseas companies, group registration, and divisional registration. The overseas companies need to appoint a local agent to act on their behalf. Such registrants must include a letter along with the application form stating, the same.
It takes around 3 weeks to complete the registration process. After the successfully GST registration of the company, company or business owner receives a letter of ‘notification of GST registration’. This letter would include all the details like the GST registration number, the filing frequency, and filing due dates as well as other instructions. Taking technology in its laps, IRAS has made provisions for GST electronically.
The Process of Payment, Charging and Implementing GST
- A GST registered entity should charge GST, for only those goods and services that are supplied locally.
- The amount gathered has to be duly transferred to the IRAS.
- The GST amount can be charged on top of the selling price, or can be included in the price as GST-inclusive.
- When quoting a price, the trader always uses GST-inclusive. This should remain valid for all prices displayed, advertised, published, and quoted verbally or in writing. If the trader fails to do so, he/she is liable for penalty charges. On the other hand, for F&B industry charging Singapore GST i.e. on the service charge, prices displayed can be GST-exclusive.
- A proper tax invoice should be issued; if a GST registered entity bills, other GST registered entity. This invoice can be used by the paying entity to claim the input tax on standard-rated purchases.
- The tax invoices should be retained by both the entities, at least for a period of 5 years.
- In case a tax invoice is not issued to the payer, at least a printed and duly signed bill should be issued upon receipt of the payment.
- Proper input tax claims for the accounting period, according to the date of the tax invoice or import permits, should be made.
Process of Filing GST Returns
Based on the accounting cycle, a GST F5 has to be submitted to the tax authorities. Normally filing GST returns has to be done on the quarterly basis. The return documents must contain all the information, as if the total value of your local sales, exports, and purchases from GST registered entities, the GST collected as well as GST claimed for the subsequent accounting period
Nowadays IRAS accepts electronic GST filing. Once a company submits its GST F5, the next GST return will be made available at the end of each accounting period. E filing of GST can be accomplished right one day, after the accounting period ends. However, it is important to ensure that the GST return filing of the IRAS has to be completed no later than one month after the end of the prescribed accounting period.
Even if there is no tax due for a given period, a ‘nil’ return must be submitted. Upon late filing the GST returns provisions are made to impose Late fees or penalties. This remains valid, regardless of whether the net GST declared is a payable or refundable amount. GST refunds are usually made within 30 days from the date of receipt of the return.
Various Singapore GST Schemes to Help Businesses
- Major Exporter Scheme (MES): It helps to ease the cash flow of major exporters having considerable imports.
- Cash Accounting Scheme (CAS): To ease the cash flow of small businesses with the annual turnover under S$1 million.
- Goods and Services Tax Assistance Scheme: For small and medium sized enterprises (SMEs) voluntarily registering for GST Singapore.
- Third Party Logistics Scheme: The approved third parties need not pay GST, as they are providing logistic services to foreign clients, who thereby use Singapore for logistics purposes.
- Hand Carried Exports Scheme: Permits you avoid GST by hand carrying the goods out of Singapore via Changi International Airport.
- Zero-GST Warehouse Scheme: This will make your zero GST warehouses, approved by the Singapore customs department for the storage of non-dutiable goods, free of Goods and Services Tax.
- Tourist Refund Scheme: This scheme permits tourists to claim a refund on the GST paid by them at the time of the goods they purchased in Singapore.
- Approved Contract Manufacturer and Trader (ACMT) Scheme – In this, the entities cannot charge GST when instructed by an overseas customer to deliver your finished goods to his customers in Singapore.
- Approved Marine Fuel trader (MFT) Scheme – In this scheme, an entity is not required to pay GST on purchase of marine fuel oil from a local GST registered supplier.
At Singapore taxation services, we provide you with guidance and assistance services on the, GST calculation, GST form completion formalities and monthly/quarterly GST returns to IRAS. We thrive to make your GST Singapore registration process simple and convenient.
Please feel free to contact us on +65-6536 0036 or drop in an email at firstname.lastname@example.org