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GST – Goods and Services Tax

GST

The goods and services tax (GST) of Singapore which stands at 7% is arguably one of the lowest when compared to the other Asian countries. Not just that, but a variety of schemes have also been introduced by the Singapore regime to reduce the GST filing burden of businesses.

The Goods and Services Tax Singapore, introduced on 1st April 1994, is a tax levied by the Singapore government on the import of goods into Singapore and on all the supplies of goods and services in Singapore. The GST Singapore Tax is an indirect tax similar to the Value Added Tax (VAT) in other countries. The main reason for the corporate entities to go for GST Registration Singapore is to lower the operating costs, since the real taxpayer is the consumer. The current rate of GST in Singapore stands at 7%.

Types of Goods and Services Tax Registration in Singapore

The GST registration in Singapore is broadly classified into two, depending upon the turnover of the company:

Compulsory Registration

GST registration in Singapore becomes mandatory if your business turnover is exceeding S$1 million for the past 12 months, which is termed as Retrospective basis and if you are expecting the turnover of your business to go beyond S$1 million in the next 12 months, which is known as Prospective basis.

Voluntary Registration

You can voluntarily apply for GST registration if your business turnover does not exceed S$1 million or your supply of goods is outside Singapore, or you make exempt of International services. You can reap the benefits of voluntary registration by claiming the input tax incurred during the course of your business activities.

When you opt for voluntary GST registration, you can claim the input tax incurred in the course of the business. This is true when the goods you deal with are zero-rated supplies. If the business only provides zero-rated supplies, then they also have the option for being exempted from registering for GST. This is true even when the turn-over exceeds the registration cut-offs.

When to Opt out of GST Registration?

There is also a provision in which the companies can choose to opt out of the GST registration. This is possible when the business in picture stops or is sold-off, or the sales figure dip to less than 1 million SGD. For opting out of GST, the companies have to submit an application form along with the relevant documents.

Advantages Associated with GST Singapore Registration

  • The process of getting registered for GST Singapore and later on involving in GST filing with the Singapore Tax Authority IRAS (Inland Revenue Authority of Singapore), gives a positive indication to your customers that you are an established entity.
  • Registration for GST only occurs when the company reaches a certain size threshold, so registering for the same will ensure that your company has certain size.
  • Your cost of conducting business is reduced as the end-user is the ultimate taxpayer
  • GST is levied only on consumption and not on your savings and investment
  • GST is viewed as a fair tax system i.e. taxes are only paid when people spend their money
  • GST ensures that the government keeps getting a stable inflow of revenue
  • Collecting GST is relatively simple, which makes it an efficient tax system

Disadvantages Associated with GST Singapore Registration

GST registration Singapore brings in certain additional duties and responsibilities, which calls for extra administration activities.

  • It becomes essential to hire an accountant to understand the intricacies of GST filing
  • If a supplier is GST registered, his selling price will increase by 7%. However, if his customer is not GST registered, the 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.
  • The 7% price hike in the selling price makes it difficult for the lower income groups to cope up with, especially in these times of inflation.

Goods and Services that are subjected to GST

It is seen that GST gets charged on taxable supplies. By taxable supplies, it means those goods and services that are manufactured in, or imported from Singapore. These taxable supplies fall into two categories, namely standard rated and zero-rated. The goods and services that are sold locally within Singapore fall under the category of standard-rated supplies. While those that are exported from Singapore are counted as zero-rated supplies. The manufacturer of export goods is liable to claim the input tax levied on purchase of inputs.

The other category that is exempt from Singapore GST is the exempt supplies category. Majorly, the sale and lease of residential land and financial services are the ones, which remain exempted from GST.  The differentiating factor between the zero-rated supplies and the exempt supplies is that the latter cannot claim the input tax.

Lastly, there are a few out-of-scope supplies, which remain out of scope of the GST. The ones included in the out-of-scope supplies are the ones who –

  1. Bring about private transactions
  2. Carry out sales of goods outside Singapore
  3. Carry out sales within zero-GST warehouse

GST Registration Process in Singapore

There are various types of forms that the companies need to fill, if they want to be registered for Singapore GST. GST F1 is a form that should be duly filled by the company, and sent to the concerned tax authorities. If the business entities are working in partnerships, an additional form (GST F3) should be provided. This form is used to draw information about the partners involved in running the business.

Similarly, various types of forms are available for foreign companies, group registration, and divisional registration. It is mandatory for the foreign companies to appoint a local agent, who will act on their behalf. Such registrants must include a letter of consent along with the said application form, which states that the local agent will be the foreign company’s representative in Singapore.

The registration process for GST, takes around 3 weeks. After the company is registered for GST, it receives a ‘notification of GST registration’ letter. This letter would include all the details pertaining to GST like the GST registration number, the filing frequency, and filing due dates as well as other instructions. It is beneficial for the companies to file their GST electronically.

The Process of Paying, Charging, and Implementing GST

  • An entity registered for GST can charge the said tax, on only those goods and services that are supplied locally
  • IRAS is the authority to which the GST amount gathered has to be duly submitted
  • The GST amount can be added to the selling price, or can be included in the price and sold as GST-inclusive.
  • When quoting a price, the trader must always use the terminology as ‘GST-inclusive’. This is applicable for all the prices displayed, advertised, published, and quoted verbally or in writing. If the trader fails to do so, he will be charged a penalty. On the other hand, the Singapore GST charged to the F&B industry i.e. on the service charge, prices displayed can be written as ‘GST-exclusive’.
  • If a company is GST registered, and it gets into a contract with other GST registered entity, then a proper tax invoice should be issued. This invoice is used by the payer entity to claim the input tax on standard-rated purchases.
  • The GST tax invoices need to be retained by both the entities, at least for a period of 5 years.
  • When a tax invoice is not issued to the payer, a printed and duly signed bill should be issued after the payment is made.
  • Proper input tax claims for the accounting period, according to the date of the tax invoice or import permits, should be made to the tax authorities.

Filing of GST Returns

GST returns should be submitted to the tax authorities based on the accounting cycle. This return filing process is done on a quarterly basis. The documents for filing returns need to contain information such as the total value of the local sales, exports, and purchases from GST registered entities, the GST collected and GST claimed for that accounting period.

E filing of GST is accepted nowadays. Once a company submits its GST F5 form, the next GST return filing should be at the end of the accounting period. E filing of GST should be done one day after the accounting period ends. However, care should be taken that IRAS receives the return no later than one month after the end of the prescribed accounting period.

Even if there is not tax due for a given period, the company is required to file a ‘nil’ return. Late fees or penalties are mandatory if the company files the Singapore GST return late. This condition remains valid, regardless of whether the net GST declared is a payable or refundable amount. GST refunds are made within 30 days from the date of receipt of the return documents.

Singapore GST paid to the suppliers can offset the money collected as GST from the customers. The money that 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.

Introduction of Different GST Singapore Schemes to Assist Businesses

  • The Goods and Services Tax Assistance Scheme is meant for small and medium sized businesses who apply for voluntary GST registration.
  • The Major Exporter Scheme (MES) is for businesses with significant imports and exports thereby easing their cash flow.
  • The Third Party Logistics Scheme is permits you to import goods without paying GST.
  • The Zero-GST Warehouse Scheme will make your warehouses bypass the GST Singapore.
  • The Cash Accounting Scheme (CAS) is for businesses with turnover less than S$1 million.
  • The Tourist Refund Scheme allows tourists to claim a refund of the GST they paid during the time of their purchase of goods in Singapore.
  • The Hand Carried Exports Scheme allows you to avoid GST by hand carrying the supply of goods out of Singapore.

We at Accountingservice.com.sg help you avail the guidance and assistance services on the Goods and Services Tax Singapore, GST calculation, GST form completion formalities and the submission of monthly/quarterly GST return to IRAS, thereby making your pre and post GST Singapore registration process hassle-free. Please feel free to contact us on +65-6536 0036 or drop in an email at info@accountingservice.com.sg

 

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