The GST rate is about to change from 8% to 9% starting the 1st of January 2024. But, the changes have several accounting and invoicing implications that you need to prepare now. Learn how the change will impact your business and accounting in this article. By the way, the GST rate increased from 7% to 8% in Singapore on 1st January 2023, and is increasing to 9% in 2024.
Is there any other increase scheduled?
No, so far the Singaporean Government has not announced any further increase of GST rate beyond the 9% in 2024.
In this article, we will address several frequently asked questions regarding GST rate in Singapore:
- What is the GST?
- What do I need to do to change the GST rate?
- What if my product or service has been fully provided and/or fully paid before 2024?
- What if my product or service has been partially completed OR partially paid before 2024?
- What if my product or service has been partially completed AND partially paid before 2024?
- What if an invoice has already been issued on 8% GST rate?
- What if I use Xero for my accounting?
- My issue is not part of the list above?
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.
To know more about GST and if your company is required to register to GST, read our full guide on GST at: Goods and Services Tax (GST): All you need to know
What do I need to do to change the GST rate?
For most businesses collecting GST, the GST rates stated on invoices will need to be updated from 8% to 9%. All invoices and payments received on 1st January of 2024 or after must account for 9% GST rate (if your business is GST registered). Please make sure all your accounting systems are up to date with the new rate, this includes your point-of-sale, invoicing, accounting software and all systems which include the GST.
What if my product or service has been fully provided and/or fully paid before 2024?
The GST is 8% for goods and services fully delivered and/or fully paid before 1st January 2024. If you have completed the order by fully delivering the goods or performing all services before the end of the year 2023, then you may charge the GST at 8%. In the other case, if you have issued the invoice and received full payment for the invoice in 2023, then you may be charged an 8% GST rate.
What if my product or service has been partially completed OR partially paid before 2024?
- If you have been partially paid before 1st January 2024, you are required to collect a 9% GST rate on all remaining payments made on or after 1st January 2024.
- If you have partially delivered your goods or services, you are required to collect 9% GST rate on the remaining value of the service performed and/or good delivered on 1st January 2024 or after.
On the other hand, if your service or goods have not been paid or delivered in 2023, the 9% GST rate applies to the entire transaction value.
For instance:
- You sold a good or service worth SGD 100 (excluding GST) on 10th December 2023.
- On 20th December 2023, SGD 40 worth of the good or service has been delivered.
- On 22nd December 2023, the tax invoice for the full good or service of SGD 100 has been issued.
- On 5th January 2024, the client paid the full invoice for GST 107.00 (including GST at 8%).
- The full good or service is expected to be delivered before the end of January 2024.
In that case, you need to:
- Issue by 15th January 2024, a credit note:
- For the entire invoice (SGD 100 + SGD 7 for the 8% GST collected), OR
- For the part of the goods or services delivered after the end of 2023 (SGD 60 + SGD 4.2 for the corresponding 8% of GST collected).
- Issue a new tax invoice by 15th January 2024 a new tax invoice:
- For the entire invoice with 2 separate parts (SGD 40 + SGD 2.8 for the 8% GST collection AND SGD 60 + SGD 4.8 for the 9% GST collection) each corresponding to the part of the good/service delivered before 2024 and during 2024, OR
- For the part of the good or service delivered in 2024 (SGD 60 + SGD 4.8 for the 9% GST collection)
What if my product or service has been partially completed AND partially paid before 2024?
In that case, you must charge a 9% GST rate on the smaller remaining value of goods/services to be delivered OR payments to be made.
For instance:
- You sold a good or service worth SGD 100 (excluding GST) on 10th December 2023.
- On 20th December 2023, SGD 40 worth of the good or service has been delivered.
- On 22nd December 2023, the tax invoice for the full good or service of SGD 100 has been issued.
- On 26th December 2023, payment is received for SGD 60 of the good or service.
- The full good or service is expected to be delivered before the end of January 2024.
In that case, you need to:
- To issue a credit note and new tax invoice for the smaller remaining amount in value:
- In that case, there is SGD 60 worth of goods or services to be delivered in 2024, and, SGD 40 payment expected to be paid in 2024.
- The SGD 40 expected payment is the smaller, the 9% GST rate should apply to the remaining payment in 2024.
What if an invoice has already been issued on 8% GST rate?
If your invoice has not been fully paid or the services or goods fully delivered before 2024, the GST rate needs to be adjusted for a part or the invoice in full. In this case, you can issue a credit note and a new tax invoice to the customer/client before 15th January 2024 to reflect the new GST rate and the GST amount chargeable.
Please note that you are not allowed to issue a simplified tax invoice subject to two rates. But you can issue an invoice clearly stating which parts of the supply are subject to an 8% GST rate or 9% GST rate. Or, you can issue 2 separate tax invoices, one for each GST rate.
What if I use Xero for my accounting?
You should easily find a button set up by Xero to increase your GST rates to 9% by default “Update to 9% defaults”. Although you should still check in your Xero account that the new 9% rate applies in the following:
- Invoices and bills (including repeating templates)
- Bank reconciliation and bank rules
- Drafted transactions (invoices, bills and manual journals)
- Xero HQ Chart of Account Template
- Financial practice settings in Xero Practice Manager
- ALL apps you have connected through the Xero App Store
You can find more information on Xero.
My issue is not part of the list above?
You can either check the e-tax guide assembled by the Inland Revenue Authority of Singapore (IRAS) on GST Rate Change. The alternative is to avoid the struggle and let MBiA handle your accounting, all your accounting, including the GST rate change of 2024!
