This guide outlines the key concepts of Singapore’s Goods and Services Tax (GST) system relevant to Singapore companies, including the definition of GST, registration requirements, pros and cons of GST registration, filing GST returns, and business support schemes.
Goods and Services Tax (GST) was implemented in Singapore on April 1, 1994. The GST Act is modeled after the UK’s VAT legislation and New Zealand’s GST legislation. The Inland Revenue Authority of Singapore (IRAS), as an agent of the Singapore government, is responsible for administering, assessing, collecting, and enforcing the payment of GST. The introduction of GST was seen as a means to lower personal and corporate income tax rates while maintaining a stable revenue base for the government. GST is an indirect tax as it is levied on expenditure. The current GST rate is 9% (effective since January 1, 2024; it was previously 8%).
Table of Contents
What is Goods and Services Tax (GST)?
GST, also known as Value Added Tax (VAT) in many other countries, is a consumption tax levied on goods and services supplied in Singapore and on goods imported into Singapore. GST is an indirect tax, expressed as a percentage (currently 9%), applied to the selling price of goods and services provided by GST-registered business entities in Singapore.
GST is collected from the final consumer, so it does not typically become a cost to the company. Businesses simply act as collection agents on behalf of the Singapore tax authorities.
What Does GST Mean for Singapore Companies?
GST-registered companies must charge GST to their customers on the goods and services they provide, and then remit the collected tax to the tax authorities. For example, if a GST-registered company charges a customer S$100 for a service in Singapore, it must invoice the customer S$109 (S$100 for the service plus 9% GST). This GST amount, collected from the customer on behalf of the tax authorities, must then be paid to the Inland Revenue Authority of Singapore every quarter through a GST return. A company incorporated in Singapore is not automatically registered to collect GST. Companies that meet certain criteria must apply to IRAS to become a GST-registered company before they can charge GST.
Does My Company Need to Register for GST?
GST is a self-assessed tax, and businesses must continuously evaluate the necessity of registering for GST. There are two categories for GST registration: compulsory registration and voluntary registration.
Compulsory Registration
It is mandatory to register for GST in the following situations:
- The business’s turnover in the past 12 months has exceeded S$1 million, which is known as the retrospective basis; or
- The business is currently making sales and can reasonably expect its turnover for the next 12 months to exceed S$1 million, which is the prospective basis. This includes any signed agreements/contracts that will generate expected revenue of more than S$1 million in the next 12 months.
When a business’s revenue exceeds S$1 million, it must submit a GST application to IRAS within 30 days. Failure to register with IRAS within the specified timeframe will result in penalties. Singapore has anti-avoidance provisions to ensure that entities are not set up merely to keep their turnover below the threshold and thus avoid registration.
Voluntary Registration
A business can also voluntarily register for GST if it is not under the obligation of compulsory registration, depending on its business operations. The business must have plans for sales or have already started making sales (taxable supplies) in Singapore.
⚠️Please note: If a business chooses to voluntarily register for GST, there are other conditions to meet.
Once voluntarily registered, a business must remain registered for at least two years and comply with GST regulations, file GST returns on time every quarter, and maintain all records for at least five years, even if the business has ceased and has de-registered for GST. The business may also have to comply with any other conditions imposed by the tax authorities.
Exemption from Registration
If a business only makes zero-rated supplies, it can apply for an exemption from registration, even if its taxable turnover exceeds the registration threshold. This allows the business to be free from the administrative requirements of GST registration and subsequent quarterly GST filings. IRAS will approve the exemption if more than 90% of the business’s total taxable supplies are zero-rated and its input tax is greater than its output tax.
De-registration
A business can de-register when it ceases operations, is sold as a whole to another person, or its sales do not exceed S$1 million. An application form along with other relevant documents must be submitted to the tax authorities within 30 days of ceasing to trade.
Must Singapore Companies Charge GST?
No. It is only necessary to register and charge for GST if the annual turnover exceeds S$1 million or if the company has applied to IRAS to become a GST-registered company.
Can Singapore Companies Offset GST Charged by Their Suppliers When Paying GST Collected from Customers?
Yes. The GST a company charges its customers is called output tax, while the GST a company pays to its suppliers is called input tax. The amount paid to (or claimed from) the tax authorities is the difference between the output tax and the input tax.
Can a Singapore Company Charge GST if It Is Not GST-Registered?
No. A business that is not registered for GST must not charge GST. It is an offense for a non-GST registered business to charge GST.
Must Singapore Companies Charge GST When Exporting Goods or Services from Singapore?
Exported goods and services are called zero-rated supplies and are not subject to GST.
If a Company Is Not Required to Register, Are There Benefits to Registering for GST?
It depends. If a business is compulsorily required to register for GST, it has no choice. Otherwise, a business should consider the following pros and cons of registering for GST:
Benefits
For the government:
- It generates a stable and predictable tax revenue in both good and weak economic conditions.
- It is an effective tax due to its relatively low administration and collection costs.
- It allows the government to lower corporate and personal income taxes, thus encouraging more foreign direct investment. This can lead to overall economic growth.
For businesses and individuals:
- Most large, established businesses are GST-registered. Registering for GST is often a signal to customers that one’s business is established and has a certain scale.
- GST is a fairer tax system. It only taxes the self-employed and wage earners when they spend money.
- GST applies only to consumption. Savings and investments are not taxed. This encourages people to save and invest in productive activities.
- Operating costs are reduced, which in turn helps to lower prices. Since the real taxpayer is the end-user, combined with a multi-stage credit mechanism, businesses do not have to bear the tax cost.
Disadvantages
- The downside of GST registration is the administrative burden of fulfilling the duties and responsibilities of being GST-registered.
- One must study the complexities of GST or pay to hire an accountant to handle the work, which can be a significant cost in some cases.
- GST can be a burden on low-income groups, especially during periods of high inflation when a 9% tax is payable on the rising prices of daily necessities.
* Registering for GST effectively increases a business’s sales price by 9%. Customers who are not GST-registered will not be able to recover the GST charged by this business. Therefore, despite the cost reduction from being able to recover GST, customers may be less inclined to buy.
What Types of Goods and Services Are Subject to GST?
GST is charged on taxable supplies. A taxable supply is a supply of goods or services made in Singapore, other than an exempt supply. A taxable supply can be a standard-rated (currently 9%) or a zero-rated supply.
Most local sales of goods and provision of local services in Singapore are standard-rated supplies.
Zero-rated supplies of goods and services are subject to 0% GST. Exports of goods and provision of international services are mainly zero-rated supplies. A GST-registered company that makes zero-rated supplies can claim input tax on goods purchased.
Exempt supplies are not subject to GST, and there are two categories: the sale and lease of residential land, and financial services. Input tax incurred in making exempt supplies is not claimable.
Out-of-scope supplies are supplies that fall outside the scope of the GST Act. Generally, they are:
- Transfer of a business as a going concern
- Private transactions
- Third-country sales – refers to the sale of goods from a place outside Singapore to another place outside Singapore
- Sales made within a Zero GST Warehouse
What is the GST Registration Process?
The Singapore GST registration form (GST F1) along with necessary supporting documents must be sent to the tax authorities. If it is a partnership, an additional form (GST F3) must be completed, providing details of all partners. There are separate application procedures and forms for overseas companies, group registration, and divisional registration. Overseas registrants should appoint a local agent to act on their behalf and must include a letter of appointment with their application.
The registration process takes about 3 weeks. Upon successful GST registration, the business will receive a GST registration notification letter. This letter will contain the GST number, the effective date the business becomes GST-registered, the filing frequency and deadlines, and any other special instructions. GST returns must be filed electronically.
How to Pay, Collect, and Implement GST?
- As a GST-registered entity, the business is responsible for charging GST on the supply of goods and services and remitting the collected GST to IRAS. GIRO payment arrangements through a Singapore bank account are the preferred method of payment.
- You can charge GST on top of the selling price or absorb the GST by treating the price as GST-inclusive.
- As a GST-registered trader, a business must display and quote GST-inclusive prices on all prices shown, advertised, published, and quoted, whether verbally or in writing. It is an offense not to display GST-inclusive prices to the public and will result in penalties. However, for goods and services subject to a service charge (food and beverage industry), the displayed prices may be exclusive of GST.
- When billing customers, if the customer is a GST-registered company, a tax invoice must be issued so that the latter can use it as a supporting document to claim input tax on standard-rated purchases. It contains information on the goods sold and the corresponding GST charged and can replace a regular invoice. Tax invoices must be kept as part of the business records for at least five years. Please note that tax invoices do not need to be submitted with the GST return. Generally, they should be issued within 30 days of the supply. There is no need to issue a tax invoice for zero-rated, exempt, and deemed supplies, or to non-GST registered customers.
- After payment, if a tax invoice or simplified tax invoice has not yet been issued, a serially printed receipt must be issued to the payer.
- Records of all business transactions that affect GST declarations must be kept. In addition, creating a GST account (a summary of the total input tax and output tax for each accounting period) will help the business complete its GST return.
- Input tax claims should be made in the accounting period based on the date of the tax invoice or import permit.
How to File for GST Returns?
A GST-registered entity is required to submit a return (GST F5) to the tax authorities based on its accounting cycle, usually on a quarterly basis. In the tax return, the business needs to state the total value of local sales, exports, and purchases made from GST-registered entities during that accounting period, the GST collected, and the GST claimed. GST returns are currently filed electronically. Once you start filing GST F5 electronically, the next GST return will be available online at the end of each accounting period. You can file GST F5 electronically one day after the end of the accounting period. You must ensure that IRAS receives the tax return within one month after the end of the prescribed accounting period. If there is no tax payable for the period, a “nil” return must still be submitted. Penalties will be imposed for late submission of GST returns, regardless of whether the net GST declared is a payment or a refund.
The net GST must be paid within 1 month after the end of the prescribed accounting period. Penalties will be imposed for late payment of GST. GST refunds are usually processed within 30 days of receiving the application form.
Are There Any GST Schemes to Help Businesses?
The Singapore government has introduced several assistance schemes related to GST. These schemes generally help to ease the cash flow of businesses and contribute to creating a pro-business environment.
- Tourist Refund Scheme – Allows tourists who purchase goods in Singapore from participating GST-registered retailers to apply for a refund of the GST paid if they take the goods out of Singapore.
- Cash Accounting Scheme – Specifically for small businesses with an annual turnover not exceeding S$1 million.
- Gross Margin Scheme – GST is charged only on the gross margin of the goods.
- Hand-Carried Exports Scheme – If a business wishes to zero-rate the supply of goods to an overseas customer and the goods are hand-carried out of Singapore via Changi International Airport.
- Zero GST Warehouse Scheme – Businesses can convert their warehouses into zero-GST warehouses to minimize red tape and bypass GST processes.
- Discounted Sale Price Scheme – Allows for a 50% GST charge on the sale of second-hand cars.
- Import GST Deferment Scheme (IGDS) – Allows businesses to pay import GST when their monthly GST return is due, rather than at the time of import.
- Other Industry-Specific Schemes – The government also offers various GST schemes for different industries such as marine, logistics, etc.
* Major Exporter Scheme (MES) – Aims to help the cash flow of major exporters who have a significant amount of imported goods.
Are There Any GST Guides for Specific Industries?
If you would like to learn more details about Singapore’s GST, you can browse the IRAS official website for introductions to GST for different industries.
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