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Goods and Services Tax (GST) is similar to Valued Added Tax (VAT) in other countries and is a relatively new form of tax in Singapore. GST was implemented on 1st April 1994 in Singapore. The GST Act is modeled on the UK VAT legislation and New Zealand GST legislation. The Inland Revenue Authority of Singapore (IRAS) acts as the agent of the Singapore government and administers, assesses, collects and enforces payment of GST. Introduction of GST is seen as a means to lower personal and corporate income tax rates while maintaining a steady revenue base for the government. GST is an indirect tax as it taxes expenditure. The current rate of GST is 7%. This guide provides an overview of the key concepts of Singapores GST system as it relates to Singapore companies definition of GST, registration requirements, advantages and disadvantages of GST registration, filing GST returns, and schemes to aid businesses.
What is GST?
Also known as Value Added Tax (VAT) in many other countries, Goods and Services Tax (GST) is a consumption tax that is levied on the supply of goods and services in Singapore and the import of goods into Singapore. GST is an indirect tax, expressed as a percentage (currently 7%) applied to the selling price of goods and services provided by GST registered business entities in Singapore. GST tax is charged to the end consumer therefore GST normally does not become a cost to the company. Businesses merely act as collecting agents on behalf of Singapore tax department.
the turnover of your business is more than 1 million SGD for the past 12 months - known as the retrospective basis OR you are currently making sales and you can reasonably expect the turnover of your business to exceed 1 million SGD for the next 12 months known as the prospective basis.
Please note that failing to register will attract penalties. There are anti-avoidance provisions to ensure that entities are not established merely to keep turnovers less than the threshold and thereby avoid registration. Voluntary registration You may apply to voluntarily register for GST if you are not liable to compulsorily register and you satisfy the following conditions:
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Your annual turnover is not more than 1 million SGD, or You only supply goods outside Singapore (out-of-scope supplies), or You make exempt supplies of financial services that are also deemed as international services
The advantage of voluntary registration is that you can enjoy the benefits of claiming input tax incurred in the course of your business. This is especially so when you make purely zero-rated supplies (exports or international services). Please note, once you are voluntarily registered, you must remain registered for at least two years and you have to maintain all your records for at least five years, even after your business has ceased and you have deregistered from GST. You may also have to comply with any additional conditions that are imposed by the tax authority. Exemption from Registration If you make only zero-rated supplies you can apply for an exemption from registration, even if your taxable turnover exceeds the registration limits. This allows you to escape from the administrative requirement of GST registration, as you would only be reclaiming and not paying tax to the IRAS, since the cost to you is the input tax. IRAS will approve the exemption, if more than 90% of your total supplies are zero-rated and if your input tax is greater than your output tax. De-registration You can cancel your registration when your business stops or when your business is sold as a whole to another person or when your sales figures do not exceed 1 million SGD. You must submit an application form, along with other relevant documents to the tax authority within 30 days from the date of cessation.
No. Your company is required to register for GST and collect GST only if its annual turnover exceeds S$1 million.
When paying GST tax collected from customers, can the Singapore company offset the GST tax charged by its suppliers?
Yes. The GST charged by a company to its customers is known as output tax whereas GST paid by the company to its suppliers is called input tax. What you pay to (or claim back from) the tax authorities is difference between your output and input tax.
Must a Singapore company collect GST when exporting goods or services out of Singapore?
No. Export goods and services are called zero rated supplies and GST tax is not applicable.
Drawbacks 1. The disadvantage of GST registration is the administrative burden that comes with discharging the duties and responsibilities of GST registration. 2. One must either study the intricacies of GST or pay an accountant to undertake this work which in some cases can be a reasonably high cost. 3. Being GST registered effectively increases your selling price by 7%. Your customers who are not GST registered would not be able to recover the GST you charge. So although your costs are reduced because you can recover GST, your customers might not be too pleased. 4. GST can be a burden to lower income groups, especially during times of high inflation when the 7% tax is paid on the increasing price of daily essentials.
Transfer of business as a going concern Private transactions Third country sales refers to sale of goods from a place outside Singapore to another place outside Singapore Sales made within Zero GST Warehouse
registration. Overseas registrants are expected to appoint a local agent who will act on its behalf and must include a letter, along with the application form, stating the same. The registration process takes approximately 3 weeks. Upon successful GST registration, you will receive a Notification of GST Registration letter. This letter will contain your GST number, your filing frequency and filing due dates as well as any other special instructions. You must file your GST returns electronically.
must still submit a nil return. Penalties will be imposed if you file the GST return late. This is regardless of whether the net GST declared is a payable or refundable amount. You must pay the net GST within 1 month after the end of your accounting period. Penalties will be imposed if you are late in making the GST payment. GST refunds will usually be made within 30 days from the date of receipt of the return.