What is Goods and Services Tax?
Abbreviated as GST, Good and Services Tax is a broad-based consumption tax levied on all imports and local supplies of goods and services in Singapore. It was introduced in Singapore on 1 Apr 1994 and is collected by Singapore Customs or businesses on behalf of Inland Revenue Authority of Singapore (IRAS). In many other countries, it is referred to as Value Added Tax (VAT).
All consumers in Singapore must pay their GST as an indirect tax, which is usually expressed as a percentage of the price of goods and services sold. If you are a consumer, you don’t have to worry about remitting the GST tax directly to IRAS because the prices you pay for your goods has already reflected the GST. The company that you are buying from simply acts as collecting agent on behalf of IRAS.
Currently, the GST rate in Singapore is 7%. GST-registered businesses must charge and account for GST at 7% on all sales of goods and services. For example, if Tianlong Services Pte Ltd sells bookkeeping services to clients for SGD500 a month, SGD35 goes to IRAS. Your company does not have to pay the tax only if the sale is zero-rated or exempted under the GST law.
Registration of GST
There are two categories of GST registration: compulsory registration and voluntary registration.
Compulsory registration is mandatory for all companies in Singapore as long as their annual taxable revenue exceeds or is expected to exceed SGD1 million. As soon as the company is considered legally fit for GST, they are given a 30-day grace period to submit the application form to IRAS.
Voluntary registration occurs when your business plans to carry out sales or has started selling goods and services in Singapore. As a business owner, you must go through the IRAS Comptroller to approve your voluntary registration, after which you are mandated to remain registered for at least two years. Furthermore, you must file the GST returns on a quarterly basis, and maintain at least a 5-year compliance record even after terminating your business or deregistered from GST.
Tianlong Services Pte Ltd can provide you with a qualified tax consultant to offer you tax advisory services for such business needs.
De-registration
If you cease to carry out your business operations, you can cancel your GST registration by submitting an application form to IRAS. You can also deregister your company if you have sold out your entire business or when your sales figures have dropped below SGD1 million. You will only have 30 days from the day of cessation to submit the application form along with other appropriate documents.
Exemption from Registration
If your company sells zero-rated supplies, such as equipment for the disabled, donated goods sold in charity shops, prescription medicines, water services, etc., you can be exempted from GST registration even if your taxable turnover exceeds SGD1 million. However, you must apply for the same through IRAS in order to free your business from quarterly GST filing.
Your business is liable for exemption only if your input tax exceeds your output tax, and if over 90% of your total taxable supplies are zero-rated.
Charging and Collection of GST
After registering your company for GST, it is upon you to ensure all your goods and services reflect the charge at the prevailing rate, which is currently 7% in Singapore. Singapore Customs collects this extra charge as output tax through the IRAS.
Remember, no other Singapore company is allowed to collect GST tax from any business entity.
Filing GST Returns for your Business
All GST registered companies must file GST F5 returns on a quarterly basis to the IRAS. Currently, the return is done electronically and must indicate the following:
- Total value of your local sales
- Exports and purchases from GST registered entities
- The GST collected and GST claimed for that accounting period.
If you incurred zero tax during an accounting period, you must submit a ‘nil’ return. GST refunds are usually made within 30 days from the date of receipt of the return. The due date for returns submission and tax payment is 30 days once the accounting period ends after which penalties are levied.
Due to the timing of tax filing in Singapore, you can avoid hefty penalties by contacting Tianlong Services Pte Ltd.
Historical GST Rates
Over time, GST rates have changed as below.
- 1 Apr 1994 to 31 Dec 2002 – 3%
- 1 Jan 2003 to 31 Dec 2003 – 4%
- 1 Jan 2004 to 30 Jun 2007 – 5%
- 1 Jul 2007 to Date – 7%
- Between 2021-2025 – 9% (Proposed)
As announced in Budget 2007, the increase in rates was complemented with an offset package. All adult Singaporeans got GST Credits of $800 to $1,250 in a span of 4 years to help them cope with the effect of the GST increase. The bottom line was that those with lesser income or lower standards of living received more GST Credits.
In Budget 2009, the Government announced the distribution of additional GST Credits amounting to $250 in March 2009 to help households cope with their cash-flow problems arising from reduced incomes and unemployment.
In Budget 2018, the Government announced a projected increase of GST from 7% to 9% between the year 2021 and 2025. The government argues that it resulted from increased spending on health care, infrastructure and security, which are expected to increase further in the future.
GST/VAT Rates in Singapore and Selected Asian Nations
Even with the proposed increase in GST, Singapore still has one of the lowest GST rates in Asia as shown below.
- China – 17%
- New Zealand – 15%
- Philippines – 12%
- Australia, Indonesia, South Korea, & Vietnam – 10%
- Japan – 8%
- Thailand – 7% (Up to September 2018)
- Singapore – 7%
- Malaysia – 6%
- Myanmar – 5%
- Taiwan – 5%
If you are a business owner in Singapore, the best advice we can give you at Tianlong is to avoid moving your operations to countries with high taxes.
Need your GST filed? Contact us to have your GST filed.