If you are a business owner in Singapore, you need to understand everything about GST.
Don’t worry though, we’ve got a beginner’s guide for you that covers what it is, who can register, when to register, and the filing requirements for GST registered companies with IRAS.
What is GST?
The Goods and Services Tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption. The GST is paid by consumers, but it is remitted to the government by the businesses selling those goods and services. In many other countries, it is referred to as Value Added Tax (VAT).
GST was introduced in Singapore on 1 Apr 1994 at the rate of 3%. It was then increased to 4% from 1 January 2003, 5% from 1 January 2004 and 7% from 1 July 2007.
Prior to 1994, Singapore’s corporate income tax rate and top marginal personal income tax rate both stood at 40%. Such high rates were deemed to be uncompetitive. Therefore, Singapore’s government introduced GST to shift from direct to indirect taxes, in the hope that it would spur growth and improve the country’s competitiveness.
In Budget 2018, the Government announced a projected increase of GST from 7% to 9% between the year 2021 and 2025 due to increased spending on health care, infrastructure and security, which are expected to increase in the future.
Who Can Register?
- Sole proprietorships
- Limited Liability partnerships
- Non-profit organizations
- Statutory boards
- Government bodies
- Clubs, associations, management corporations or organizations
When is it Compulsory to Register for GST?
When your annual turnover exceeds or is likely to exceed SGD$1 million from the sale of taxable goods and services, your business must be registered to collect GST.
This requirement may be waived if most of your goods or services are exported or supplied internationally (“zero-rated supplies”). If your zero-rated supplies make up more than 90% of your total taxable supplies and being registered will lead to you claiming GST refunds, you may choose to apply for exemption from GST registration.
Please submit the GST F2 Form, which is available on the IRAS website. (www.iras.gov.sg > Quick Links > Forms > GST)
How to Register of GST
The GST registration process differs slightly depending on the type of registration and constitution of your business.
There are two categories of GST registration:
- Compulsory Registration
- Voluntary Registration
Compulsory registration is mandatory for all companies in Singapore as long as their annual taxable revenue exceeds or is expected to exceed SGD$1 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.
GST Registration Procedure
The following 2-step process captures the GST registration for your company:
Step 1: Submit an Application with IRAS
Your company can submit an application online or fill the physical paper documents and submit them to IRAS. You can also use a designated filing agent who is usually your corporate service provider to facilitate the process.
Online applications can be submitted through myTax Portal (www.mytax.iras.gov.sg)
Paper applications must be sent to the following address: 55 Newton Road, Revenue House, Singapore 307987.
You must receive approvals from IRAS before charging your customers GST.
Step 2: Receive Notification of the Effective Date of Registration from IRAS.
Once IRAS has approved your application, a confirmation letter with the following information will be sent from IRAS confirming that your company is GST-registered:
- The GST Registration Number of your company
- The effective date of your company’s GST registration
Your company must start charging and collecting GST on the effective date of GST registration.
How to File GST Tax Returns
All GST registered companies must file GST F5 returns on a quarterly basis to the IRAS. Even if you incurred zero tax during an accounting period, you must submit a ‘nil’ return.
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.
When filing an F5 return, your calculations must start with your company’s net GST as below:
Net GST = (Output GST – Input GST)
Output tax refers to the GST you have collected from your customers, while input tax indicates the GST your company paid on purchases from suppliers or on imported goods.
When you get a negative net GST, meaning, your output tax exceeds your input tax, your company must pay the net GST to IRAS.
On the other hand, if you get positive net GST, meaning, your input tax exceeds the output tax, you are entitled to a refund from the IRAS.
GST refunds are usually made within 30 days from the date of receipt of the GST F5 returns.
The due date for returns submission and tax payment is 30 days once the accounting period ends after which penalties are levied.
GST is a tax charged on the supply of goods and services produced in Singapore and on the import of goods into Singapore. The current rate is 7%. All goods and services are taxable and known as taxable supplies.
Due to the timing of tax filing in Singapore, you can avoid hefty penalties by contacting Tianlong Services Pte. Ltd. We can provide you with a qualified tax consultant to offer you tax advisory services for your business. Liaise with our dedicated specialists account specialists TODAY to attend to your GST needs.