Goods & services tax (GST) in Singapore: Complete guide.

Goods & services tax (GST) in Singapore: Complete guide

This article will provide you with all you need to know about goods and services tax in Singapore.

In Singapore, there are several types of taxes that you may or may not know. Some include income tax, property tax, stamp duty and goods and services tax. In order to start a business in Singapore, you should know what types there are and which tax you will need to pay.

As a registered tax agent with the Inland Revenue Authority of Singapore (IRAS), Acclime can take care of all your GST compliance needs in Singapore.

What is GST?

A goods and services tax (GST) was introduced to Singapore on 1 April 1994. GST is a broad-based consumption tax that applies to most goods and services provided by GST registered businesses in Singapore. The businesses effectively act as a collection agent for the government.

GST rate

The current rate for GST in Singapore is 7%. The government has announced that the rate would be raised from 7% to 9% sometime between 2022 to 2025. However, before they increase the GST, the government has to carefully assess the prevailing economic conditions as well as the country’s revenue needs at that point.

What does GST apply to?

GST generally applies to most goods and services provided by GST registered businesses to consumers and other Singapore businesses (whether GST registered or not). There are four categories of supplies:

  1. Standard rated supplies – most goods and services come under this category
  2. Zero-rated supplies – these are supplies that are not taxable such as the export of goods or services supplied internationally, for example, an international airline ticket (as the service is supplied outside of Singapore)
  3. Exempt supplies – supplies that are specifically exempted from GST such as property transactions, purchase of precious metals and the provision of financial services
  4. Out of scope supplies – when a Singapore business provides goods or services outside of Singapore to a customer who is also outside of Singapore

There are certain concessions available. For example:

  • Liquor and tobacco imported and held in GST and customs-free warehouses is not subject to GST until it leaves the warehouse
  • Imports by parcel post with a value under SGD 400 are not subject to GST
  • There are also certain free trade zones in Singapore where, if goods are imported and held in those zones, no GST is imposed until the goods are moved into Singapore customs territory

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Who needs to register for GST and when?

There are two instances where a company must register for GST:

  1. Retrospective view – The value of taxable supplies in the previous calendar year exceeded SGD one million. Taxable supplies include supplies that are zero-rated for GST purposes
  2. Prospective view – At any time, you can reasonably expect your turnover in the next 12 months to exceed SGD one million. There is no obligation to register if you are not reasonably sure (eg have signed supply contracts, etc.) that you will exceed the SGD one million thresholds

A company may also register voluntarily even if it does not cross the taxable supplies threshold. This would be beneficial in a case where a company is paying GST on its inputs but is not required to charge its customers GST. For example, a company that manufactures goods in Singapore for export or that is involved in a financial services business. That company could lodge a quarterly GST return and receive a refund of the GST it has paid on its inputs. Any business registering voluntarily needs to maintain that registration for a period of two years.

If a company has a turnover of more than SGD one million, the company may apply for exemption from registering for GST based on one of two grounds:

  1. Your taxable turnover is substantially made up of zero-rated supplies
  2. On the retrospective test, you must register, but under the prospective test, you are not required to, as you are certain that your sales will not exceed SGD one million. This may come about due to an expected fall in sales (eg a large contract has expired and has not been renewed, downsizing of the business, or the impact of Covid-19). You must be able to provide documentary evidence to the IRAS to support your view.

If you are granted exemption from registration, you are still required to monitor your taxable turnover and notify the IRAS if the situation of the company changes.

Charging and collecting GST

Once a company has registered for GST in Singapore, it must charge GST on all of its invoices to customers. This GST is known as output tax and must be paid to the IRAS. The IRAS has set out guidelines as to the information required on a tax invoice, including the company’s GST registration number, the amount of the GST and the total invoice amount including GST. For amounts under SGD 1,000 a simplified invoice may be issued. The GST that a business pays on its supplies is known as input tax.

GST must be charged on the total value of the goods or services. For example, in a restaurant, if a service charge is levied, the service charge should be added to the bill for the items consumed, and then GST charged on the inclusive service value. For imported goods, GST needs to be charged on the landed cost of the goods, which includes freight, insurance and any customs duty payable.

GST returns and payments

A company registered for GST needs to submit a GST return quarterly. The return must be submitted by the last day of the month following the end of the previous quarter. In return, the company must show the total amount of output tax and deduct it from the total amount of input tax paid. The resultant number is the GST that needs to be paid to the IRAS. If that number is negative (eg because all your goods manufactured in Singapore are exported), then the IRAS will pay a refund to the company.

A company needs to be careful with the input tax claimed – each claim needs to be supported by a valid GST invoice. Input tax should be claimed in the quarter in which it is incurred, even if the goods on which the GST was paid remain unsold by the company. Any input tax claimed must be for goods and services that will be used in the business. There are also specific exclusions from claiming input tax such as GST on club fees and GST on benefits provided to friends and family of staff.

Certain GST expenses incurred by the company in the six months prior to the company’s GST registration are claimable. GST in Singapore is claimable on:

  1. Goods held by your business at the point of GST registration
  2. Property rental, utilities and services, which are not directly attributable to any supply made by your business before GST registration

To pay quarterly GST to the IRAS, a company needs to set up a GIRO account with the IRAS. This is a type of direct debit account where the company authorises the IRAS to take the amount of GST owing out of the company’s bank account.

Sector guides

The IRAS has published GST guidelines specific for a number of business sectors in Singapore. For more information, please click on this link – Business Sector Guide.

Frequently asked questions

Who should pay GST in Singapore?

Any consumer, whether private or in business, must pay GST when a GST registered company provides them with goods or services in Singapore. The consumer will receive an invoice that will detail the goods and services provided, the details of the supplier and the amount of the GST that is included in the total invoice.

How’s GST calculated in Singapore?

GST is calculated as 7% of the taxable goods and services provided by a GST registered company.

Conclusion

Goods and services tax in Singapore is currently charged at a rate of 7% and is exempted when the goods are zero-rated supplies, or when the goods and services are supplied internationally. Registering for GST also has certain benefits such as the cost of doing business is reduced. The guide above provides in-depth information about GST in Singapore that business owners and investors should know when carrying on a business in Singapore. Contact Acclime now if you need any help with registering or paying GST in Singapore.

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