The Ultimate Guide to GST Accounting Entries in Singapore

GST accounting entries in Singapore are relatively easy to deal with. In fact, most businesses can handle them without any help from accountants.

However, there are some cases where businesses need assistance from accountants in filing their GST accounting entries in Singapore to ensure that they have done everything correctly.

On April 1, 1994, Singapore implemented the Goods and Services Tax (GST). The GST Act is modeled after the VAT legislation in the United Kingdom and the GST legislation in New Zealand.

The Inland Revenue Authority of Singapore (IRAS) administers, assesses, collects, and enforces GST payments on behalf of the Singapore government.

The implementation of GST is viewed as a strategy to lower individual and company income tax rates while retaining the government’s revenue base. It is an indirect tax because it taxes spending. GST is now levied at a rate of 7%.

GST Accounting Entries in Singapore: The Impact on a Business

If your business is GST registered, you must take GST from your consumers for the products and services you provide and then settle the tax collected with the tax authorities.

For example, if you charged a customer in Singapore S$100 for your services, you must bill your customer S$107 (S$100 for your service plus 7% GST).

This invoiced GST amount collected from the customer on behalf of the tax administration must then be paid to the Singapore tax authority on a monthly/quarterly basis via GST tax filing.

Singapore-incorporated businesses are not automatically enrolled to levy GST. Companies that meet specific qualifications must apply to IRAS to become GST registered before they can charge and collect GST.

GST Accounting Entries in Singapore: Considering the GST F5 Return

GST F5 Reporting

In Singapore, the figures declared in the GST F5 return do not appear out of thin air. They are pulled directly from the accounting entries recorded throughout the accounting period. Every GST taxable sales invoice, taxable purchase bill, and adjustment posted in the books eventually finds its way into a specific box in the GST return. This is why clean and consistent bookkeeping plays such an important role in GST compliance. When a business makes standard-rated sales, output tax is recorded in the accounts at the point of transaction. 

Getting Sales and Output Tax Right

For standard-rated supplies, output tax must be recorded correctly in the accounting system from the outset. While the GST return separates the value of taxable supplies from the GST amount, both figures originate from the same sales entries in the books. In practice, errors often arise when sales are miscoded or when GST amounts are manually adjusted without proper documentation. Even small inconsistencies between sales records and GST reporting can trigger questions during internal reviews or tax checks. 

Purchases and Input Tax

On the purchase side, GST paid to suppliers is recorded as input tax in the accounting records. However, this input tax is only reportable in the GST return if the conditions for claiming it are satisfied. As a result, the amounts disclosed in the GST F5 must be traceable back to valid purchase invoices and supporting documents. 

GST Accounting Entries in Singapore: Situations Requiring Extra Attention

Customer Accounting and GST Entries

Under Singapore’s customer accounting rules, certain transactions work differently from the usual GST treatment. Instead of the supplier charging output tax, the customer accounts for both output tax and input tax on the same transaction. This arrangement requires careful posting in the accounting system. If these transactions are not clearly identified, GST payable or claimable may be overstated. 

Credit Notes and Debit Notes

Credit notes and debit notes are commonly used to correct or revise earlier transactions, and they have a direct impact on GST accounting entries. When a credit note is issued, the original sales value and output tax must be reduced accordingly. Debit notes work in the opposite direction, increasing both the taxable value and the GST amount. Failing to adjust the original GST entries can result in discrepancies between the accounting records and the GST return. 

Cash Accounting Scheme

For businesses using the cash accounting scheme, GST is recognized only when money changes hands, not when invoices are issued or received. This means GST accounting entries are driven by payment dates rather than invoice dates. As a result, close tracking of receipts and payments becomes essential.

GST Accounting Entries in Singapore: The Registration Process

GST is a self-evaluated tax, and businesses must constantly examine the requirement to register for GST when handling their own GST accounting entries in Singapore. GST registration is classified into two types: voluntary and compulsory registration.

A business is required to register for the Goods and Services Tax (GST) if its annual taxable revenue exceeded S$1 million at the year of the calendar year. This is known as the retrospective view.

It is also obligatory if you are presently making sales and may reasonably anticipate your business’s annual taxable revenue surpassing S$1 million during the following 12 months.

This is referred to as the prospective view. It includes any signed agreements or contracts for which the anticipated revenue over the next year exceeds S$1 million.

You may also proactively register for GST even if you are not required to register based on your business operations. The company must have begun selling in Singapore or have intentions of doing so (taxable supplies).

Remember that there are extra requirements if you opt for voluntarily registration for GST for your company’s GST accounting entries in Singapore.

Even after your firm has terminated and you’ve been deregistered from GST, you must keep your data for the past five years. You may also be required to adhere to any extra conditions the tax authority sets.

If you only have zero-rated supply, you can avoid registration even if your taxable turnover exceeds the threshold. This lets you avoid GST registration and reporting.

If 90% of your taxable goods and services are zero-rated and your input tax is higher than your output tax, IRAS will grant the exemption.

GST Accounting Entries in Singapore: Input and Output Tax

When dealing with GST accounting entries in Singapore, businesses must take note of the GST input and output tax.

According to the regulations, GST input tax refers to tax paid or payable on purchase of goods or services from GST-registered suppliers or importing goods into Singapore.

Meanwhile, the GST output tax refers to the tax levied on sales of goods or services in Singapore.

When you bring goods into Singapore or buy from suppliers who are registered for GST, you may have paid GST input tax. If you meet all the requirements, you can make a claim for GST input tax.

You should claim GST input tax in the same accounting period as the source papers (tax invoice or import permit) or the “date” these details are uploaded in the accounting system.

Input tax on exempt supplies cannot be claimed unless the De Minimis Rule is met.

You can claim GST input tax paid before company incorporation and GST registration. You must reimburse GST input tax if you don’t pay your supplier within 12 months of the due date.

GST Accounting Entries in Singapore: Different Programs to Support Businesses

There are various schemes implemented by the government to help businesses with their GST accounting entries in Singapore. A list of GST programs from which a registered business can benefit from is as follows:

• Discounted Sale Price Scheme
• Cash Accounting Scheme
• Hand-Carried Exports Scheme
• Gross Margin Scheme
• Major Exporter Scheme
• Import GST Deferment Scheme
• Zero GST Warehouse Scheme
• Tourist Refund Scheme

Businesses must first obtain IRAS approval to participate in programs like the Major Exporter Scheme and the Discounted Sale Price Scheme.

Because the government is stringent about it, proper Singapore tax filing is sought-after.

They are more stringent, though, when it comes to companies that do not file their GST returns or overcharge their clients on the pretext of collecting GST.

GST Accounting Entries in Singapore: Practical Tips

Documenting and Classifying Properly

Accurate GST accounting starts with good documentation. Each transaction should be supported by a valid tax invoice, receipt, or import document. Just as importantly, supplies must be classified correctly as standard-rated, zero-rated, or exempt supply. 

Recording and Reconciling Regularly

Transactions that occur close to the end of a reporting period often create timing issues. Recording GST in the correct period helps ensure that the GST return reflects the true position for that quarter. Regular reconciliations between GST control accounts, source documents, and submitted returns are an effective way to catch mistakes early. 

Proper Record Retention

GST-related accounting records must be kept for the required statutory period and should be easy to retrieve when needed. Clear audit trails and well-maintained records not only support accurate reporting but also demonstrate that the business takes its GST obligations seriously. 

Frequently Asked Questions Related to GST Accounting Entries in Singapore