Introduced in 1994 in Singapore, Goods and Services Tax (GST) plays a critical role in the country’s economic health as a revenue driver. The introduction of GST was part of a government reform intended to shift from an income-based to a consumption-based taxation system, enhancing Singapore’s global competitiveness.
This article dives deeper into Singapore’s GST, covering what GST is for, how it applies, recent changes, who needs to register, and how it affects both consumers and businesses.
- What is the GST?
- When is your company required to register for GST?
- Disallowed claims
- Filing and Payment of GST
- GST rate change in 2024
What is the GST?
Goods and Services Tax (GST), also known as Value-Added Tax (VAT) in some countries, is a consumption tax that is levied on almost all goods and services, as well as the import of goods in Singapore. Businesses in Singapore must be familiar with GST, as they are responsible for collecting and reporting it.
When is your company required to register for GST?
Registration of GST can be categorized as compulsory registration or voluntary registration.
Compulsory registration
GST registration is compulsory if:
- Under the retrospective basis: Your taxable turnover amounted to more than S$1 million at the end of the calendar year OR
- Under the prospective basis: Your taxable turnover is expected to exceed S$1 million in the upcoming twelve months.
Under the prospective basis, registration for GST must occur within 30 days from the forecast date, and registration must be completed on the 31st day from the forecast date. Supporting documents such as signed agreements, quotations and invoices will be required to justify forecast value. In case your business fails to register within the time frame, a fine and penalty will be imposed, and you may be liable to prosecution.
You can request an exemption if at least 90% of your taxable turnover is zero-rated supplies, and if the output tax chargeable is less than the input tax claimable on imports and/or purchases from GST-registered suppliers.
Voluntary registration
You may choose to voluntarily register for the Goods and Services Tax (GST). If you qualify and respect applicable conditions, the main benefit of being registered is claiming GST incurred on your purchases.
However, you should note that a voluntarily registered business must remain registered for 2 years. Also, the business must file quarterly GST returns within the deadline and maintain all records for at least five years even if the business has ceased or deregistered from GST.
What are Taxable and Non-taxable supplies?
GST typically applies to most goods and services provided by GST-registered businesses to consumers and other businesses in Singapore, regardless of their GST registration status. Understanding the classification of taxable and non-taxable supplies enables you to identify supplies exempt from GST. There are two categories of supplies:
Taxable supplies
A taxable supply can either be standard-rated or zero-rated:
Standard-rated supplies
These are subjected to a GST rate of 7%. Most local goods and services fall under this category.
Zero-rated supplies
Zero-rated supplies are goods that are exported or services classified as international services. These are subjected to a GST rate of 0%. In this respect, no output tax is payable to the Inland Revenue Authority of Singapore (IRAS), but a business is entitled to claim input tax used in making these taxable supplies.
Non-taxable supplies
Non-taxable supplies are categorized under exempt and out-of-scope supplies. These are not subjected to GST.
Exempt supplies
A business cannot collect GST on exempt supplies and is not entitled to claim input tax. Such goods and services would include the provision of financial services and the sale and lease of residential properties.
Out-of-scope supplies
These supplies do not fall within the scope of the GST legislation. Indeed, they include the sale of goods from outside of Singapore to other places outside Singapore and private transactions.
Disallowed claims
As a registered business, you can claim GST incurred on business purchases, if the conditions for claiming input tax are respected. However, some input tax claims are disallowed:
- Benefits provided to family members or relatives of your employees.
- Costs and running expenditures incurred on company and rental motor cars.
- Sports and recreation clubs’ subscription charges.
- Medical costs for your employees are incurred unless they are mandated under the Work Injury Compensation Act (2019) or under any collective agreement within the meaning of the Industrial Relations Act (1960).
- Medical and accident insurance premiums paid for your employees, unless required under the Work Injury Compensation Act or under any collective agreement within the meaning of the Industrial Relations Act.
- Any transaction involving betting, sweepstakes, lotteries, fruit machines, or games of chance.
Filing and Payment of GST
A company registered for GST must file a quarterly GST return by the last day of the month following the end of the previous quarter. The company needs to report and subtract the total input tax paid from the total output tax. The resulting amount is the GST payable to the IRAS. If this amount is negative (e.g., if all goods produced in Singapore are exported), the IRAS will issue a refund to the company. A GST F5 form return must be filed to IRAS by all registered businesses. If you are on the GIRO plan, deductions will occur on the 15th day after the filing due date.
GST rate change in 2024
As part of the two-step GST rate change announced by the Minister for Finance in Budget 2022, the latest rise took effect on 01 January 2024, raising the rate by 1% to its current level of 9%. The government introduced this increase to contribute towards healthcare expenditure and senior care in Singapore.
- At 8% with effect from 01 January 2023; and
- Reached 9% with effect from 01 January 2024.
Learn more about GST rate change since 2024 in Singapore at our detailed article: You need to prepare the GST rate change of 2024 now!
