Businesses looking for ways to lower their corporate and even personal income tax percentages while keeping a steady income base in support of the government can check out the Goods and Services Tax Act Singapore! The GST exists as an implicit tax because it taxes expenses by eight percent.
Launched in Singapore on April 1, 1994, the purpose of the Goods And Services Tax Act Singapore is to enable the city-state to stop relying on direct taxes, and instead, shift its reliance to indirect taxes. In reality, GST’s introduction is a segment of government reform aimed at moving taxes from an income-based system toward a consumption-based system to properly boost Singapore’s international competitiveness.
Goods and Services Tax Act Singapore
This tax is a broad consumption-based tax imposed on the importation of goods, collected by Customs in Singapore, and nearly all goods and services in Singapore. In foreign countries, the same tax exists but is called VAT or Value-Added Tax.
As a tax imposed on goods and services, the Goods And Services Tax Act Singapore comes with a comprehensive and endless chain of triggered benefits down to the retailers. It is essentially a tax solely on value added via the tax credit system at each phase.
Goods and Services Tax Act Singapore: GST Covered Items
GST is levied on most imported products in Singapore, irrespective of whether the buyer is GST-registered or not. There are, however, specific exemptions, reliefs, and special schemes for certain items where the tax payable is deferred or suspended.
Starting January 1, 2020, GST is also levied on services brought to Singapore. The GST exemptions are on delivering most financial services, provision of digital disbursement tokens, lease and sale of residential assets, and local supply and importation of investment in precious metals. Global services and exported goods stay zero-rated.
Goods and Services Tax Act Singapore: A Breakdown of Related Supplies
Standard-Rated Supplies
Under the Goods and Services Tax Act, most goods and services supplied within Singapore are treated as standard-rated supplies. These are subject to GST and must be charged to customers accordingly. In practice, this covers most day-to-day business activities, such as selling products locally or providing services within Singapore. For businesses, applying the correct GST rate is important from the outset. It affects how figures are present, how invoices are issued, and how GST is reported in returns.
Zero-Rated Supplies
Zero-rated supplies are still considered taxable under the Act, but GST is charged at a rate of zero percent. Although no GST is collected from customers, businesses are generally allowed to claim back the GST they have paid on related expenses. As a result, Singapore-based businesses can remain competitive when supplying goods or services beyond Singapore.
Exempt Supplies
The Goods and Services Tax Act also sets out certain supplies that are not subject to GST. Exempt supplies usually include specific financial services and transactions involving residential properties. Because GST is not charged on these supplies, businesses are typically unable to claim input tax related to them.
Goods and Services Tax Act Singapore: Business Obligations
Charging and Displaying GST
Once a business is GST-registered, it must charge GST on all standard-rated supplies. GST should be clearly shown on tax invoices, and prices displayed to the general public are generally required to be GST-inclusive. This helps customers understand the total amount they need to pay upfront and reduces confusion or disputes over pricing. A clear and accurate GST display also reflects good business practice and supports transparency in everyday transactions.
Record-Keeping and Filing Requirements
The Act requires businesses to keep proper records of their sales, purchases, and supporting documents for a minimum period. These records are essential for preparing GST returns, which must be filed accurately and submitted on time. Maintaining organized records not only helps with compliance but also makes it easier to track business performance, manage cash flow, and respond promptly if questions are raised by the tax authorities.
Goods and Services Tax Act Singapore: Requirements for Registration
Since GST is imposed by GST-registered firms only, its registration prerequisite hinges on the business’s taxable turnover. Still, a firm can register for GST on a voluntary basis if certain criteria are met.
Compulsory GST registration requirements
A business must register for GST under these circumstances:
1. When the taxable turnover is more than SGD one million at the end of the calendar year; or,
2. When there is a reasonable basis at hand to trust that the taxable turnover will go beyond SGD one million within the next 12 months.
Voluntary GST registration requirements
Businesses can voluntarily register for GST, even though their annual taxable turnover is SGD one million or less. Many firms do register at their own will to get a tax credit in the form of an input tax. After all, this decision is beneficial for firms with a low profit and above-average input costs.
Some businesses are exempt from GST registration. These firms, irrespective of meeting the requirements for compulsory GST registration, need not register when their products are all, if not mainly, zero-rated items. These firms need not charge GST on sales nor submit GST returns once approved. The downside here is that these firms cannot claim the GST on their purchases.
Goods and Services Tax Act Singapore: Registration Process
According to the Goods and Services Tax Act Singapore, companies must register for GST within 30 days from the date of the liability to register arise. The entire registration process usually takes around three weeks. The steps to register are as follows:
Submit a GST registration application with IRAS
The application uses the GST F1 registration form with supporting documents. Different application forms exist for foreign firms, group registration, and divisional registration. If not, the designated filing representative, who is usually its corporate service provider, may apply online or personally. For online applications, submission is via myTax Portal.
Receive the notice from IRAS on the effectivity date of the GST registration
Upon approval, the firm will get a confirmation notice from IRAS with other information, such as the firm’s GST Registration Number, filing frequency, due dates for filing returns electronically, any special instructions, and the effectivity date of the GST registration. The effectivity date marks the start of the company’s charging and collecting of GST.
Goods and Services Tax Act Singapore: Key Points on Filing Returns
The GST-registered firm files its account for GST and tax returns to IRAS. The key things to remember when filing the GST returns are as follows:
• GST returns are electronically filed quarterly or monthly as indicated in the IRAS confirmation letter;
• The tax return and settlement are due a month following the closing of the GST accounting cycle;
• Although a company may not have any GST dealings during the GST accounting cycle, companies must still file a return;
• To compute the amount due, firms must get their net GST. The company must first calculate its input and output taxes to do this. Input tax exists as the GST a business shells out to other firms that supply goods and services.
On the other hand, output tax stays as the GST that GST-registered firms charge to customers when selling goods and services. The net amount for GST is the difference between the two taxes. When input tax remains greater, the firm will get a refund, but when there is more output tax, the difference is the tax due to IRAS; and,
• When IRAS refunds, the refund period depends on the accounting period. Also, certain conditions are required for companies to get a refund, such as:
1. Timely filing of all GST returns;
2. The business is not under the Comptroller’s audit; and,
3. No unpaid taxes.
Goods and Services Tax Act Singapore: Penalties and Compliance
Late Registration and Filing
The Goods and Services Tax Act imposes penalties on businesses that fail to register for GST on time or submit their GST returns late. Even when delays are unintentional, businesses may still be required to pay GST on past transactions, along with penalties or fines. If left unresolved, these penalties can add up and place unnecessary financial pressure on the business.
Incorrect Reporting and Ongoing Compliance Risks
Errors in GST reporting, such as charging the wrong amount of GST or claiming more input tax than allowed, can also result in penalties and further review. Ongoing non-compliance may lead to audits or closer monitoring, which can disrupt daily operations and take up valuable management time. By understanding the requirements under the Act and keeping accurate, up-to-date records, businesses can minimize compliance risks and operate more confidently within Singapore’s GST framework.
Premia TNC’s Assistance
Although the Goods and Services Tax Act Singapore offers benefits to many firms, following its requirements can be tricky. To ensure timely compliance and submission of an error-free GST return, most firms engage the services of accounting firms in Singapore.
At Premia TNC, we have expert accountants to facilitate our offering of varied services to companies, improving their business experience in Singapore.
