The Goods and Services Tax in Singapore
This guide provides a general overview of Singapore’s Goods and Services Tax (GST). Similar to the Value Added Tax (VAT) in other countries, this is an indirect tax designed to alleviate the Government’s reliance upon income tax and strengthen economic resistance. Introduced in 1994, the GST Act is modelled on the UK’s VAT and New Zealand’s GST legislation. Acting as an agent of the Singapore government, the Island Revenue Authority of Singapore (IRAS) is responsible for administering, assessing, collecting and enforcing this tax. The current GST tax of 7% is designed to help lower income tax rates. Consequently, Singapore has one of the lowest personal and corporate tax rates in the developed world.
Explaining the GST
The GST is a consumption tax levelled on the supply of all goods and services (including the import of goods) in Singapore. The GST is what is known as an indirect tax and is added onto the retail price of goods and services provided by GST registered businesses.
GST is charged to the end consumer as part of the purchase price and does therefore not affect the business selling the goods or services. Vendors simply act as GST collecting agents in this sense.
Companies and the GST
If you are a registered GST company, then you are required to add the GST tax to the purchase price of your goods or services and pay this to the tax authorities. For example, if you charge s$100 for a service, then you need to invoice your customer for S$107 which is the cost of your service, plus the 7% GST tax. The collected amount is send to the tax department every quarter using the GST tax filing system.
GST registered companies
Businesses are required to continually assess whether or not they should be registered for GST. There are two types of registration, compulsory and voluntary:
Compulsory registration applies to companies with a turnover of more than 1 million SGD in the past 12 months (retrospective basis) or companies who can reasonably expect a turnover of 1 million SGD in the next twelve months (prospective basis). Failing to register is you fall into these categories incurs a penalty and there are anti-avoidance provisions in place to ensure entities are not purposely working to keep turnovers under the 1 million threshold.
Voluntary registration is for companies who do not fall under the requirements for compulsory registration. Companies who may apply include those with an annual turnover below 1 million SGD, those who exclusively supply goods outside of Singapore, or those who make exempt supplies of financial services which are also deemed to be international services.
Registering voluntarily means that you benefit from claiming input tax during the course of business. This is especially applicable when you make purely zero-rated supplies such as exports and international services. Voluntarily registered companies must remain registered for a minimum of two years and keep records for five years even if the business has been wound up or is no longer registered. Companies may also have to comply with other conditions stipulated by the tax authority.
Exemption from registration
Companies who make zero-rated supplies can apply for registration exemption even if the taxable turnover of your company exceeds 1 million SGD. Applying for this means you do not have to partake in the administrative requirement of GST registration which would ultimately have you reclaiming rather than paying the tax. The IRAS will approve the exemption provided over 90% of your supplies are zero-rated and your input taz is greater than your output tax.
There are a number of instances where entities may become de-registered including when the business is stopped or wholly sold, or when your sales to not exceed 1 million SGD. De-registration requires an application form as well as the other relevant documents to be submitted to the tax authority 30 days prior to cessation.
GST registration FAQs
Is every company in Singapore required to collect GST tax?
No. Only companies with a turnover which exceeds 1 million SGD must register for and collect GST.
When paying collected GST, can Singapore companies offset the GST tax set by suppliers?
Yes. The GST charged to customers is known as output tax whilst the GST pad by companies to suppliers is known as an input tax. You can pay or claim the difference between your output and input taxes.
If a company is not registered, can it collect GST?
No. The tax can only be collected by entities which are GST registered.
Do companies who are exporting goods or services have to collect GST?
No. Zero-rated supplies (export goods and services) do not have the GST applied to them.
Is voluntary registration beneficial for companies?
There are advantages and disadvantages of registering voluntarily. Deciding whether or not voluntary registration is advantageous to your company depends on your industry and circumstances:
- Being GST registered means that company is established and successful in the eye of your customers and the public as large, established businesses tend to be registered
- The cost of doing business is reduced as businesses do not suffer a tax cost due to the multi-stage credit mechanism.
- Companies can claim the input tax which offsets the output tax paid to suppliers
- An administrative burden comes with collecting GST tax
- Companies need to have an intricate understanding of the GST or pay an accountant for their expertise which can be costly
- GST registration pushed the price of your product up by 7% which may mean you lose customers who are not able to reclaim the GST cost.
- During times of high inflation, the GST places a burden on lower income groups and raises the cost of living
Which goods and services are subject to the GST?
The GST is charged on taxable supplies which are a supply of goods or services made in Singapore (with the exception of exempt supplies). Taxable supply is generally standard rated (7%) although export goods are rated zero-supply.
Zero rated supplies are taxed at a GST rate of 0%. Registered entities who make zero-rated supplies are able to claim input tax credit on purchases of supplies. GST is not at all chargeable on exempt supplies which include the sale and lease of residential land as well as financial services. Entities who make exempt supplies cannot claim input GST.
Out of scope supplies are those which fall outside of the GST Act including:
- Third country sales where products are sold outside Singapore to another place outside Singapore
- Zero GST Warehouse scheme
- Private transactions
- Transfers of business as a going concern
The GST registration procedure
To become a GST registered company, a GST F1 registration form needs to be filled out and sent to the tax authority along with all of the necessary supporting documents. If the company is partnership, an additional F3 form must be completed giving details of the partners. For overseas companies, as well as group and divisional registration, different application procedures are required.
Registration takes around three weeks and if successful, companies receive a Notification of GST Registration letter containing a GST number, filing frequency, and due dates as well as other special instructions. GST must be filed electronically.
Paying, charging, and implementing the GST
- GST registered entities are responsible for charging GST on the supply of goods and services and then returning the collected income to the IRAS. There are a number of ways of going about this, you can choose to charge GST on top of your selling price or make your prices GST inclusive.
- Registered traders are required to show and quote GST inclusive prices on all products displayed, advertised, published, verbally quoted or quoted in writing. It is an offence not to display GST inclusive prices and there is a penalty for companies who fail to do so.
- If the customer is a GST registered entity, a tax invoice must be issued when billing so that the consumer can use it to claim input tax on the standard rated purchases. The tax invoice needs to contain information on what is being sold and the GST charged. It can be used in place of an ordinary invoice. Tax invoices must be retained as part of your business records for at least 5 years but do not need to be submitted as part of your GST returns. The tax invoice needs to be provided within 30 days from the date of supply. For GST reporting purpose, Zero-rated supplies, exempt, and deemed supplies may not require a tax invoice, neither do sales to a customer who is not a registered GST entity. When you receive a payment, you must issue a serially printed receipt to your customer if a tax invoice (simplified or otherwise) has not been issued by you.
- All business transactions that affect GST declarations must be properly recorded. Companies are required to keep a GST account to facilitate the returns process. The account is a summary of your quarterly totals that take into account both input and output tax.
- Input tax claims should be made in the quarter corresponding to the date of the tax invoice or import permit.
Filing a GST return
Registered companies are required to submit F5 form on a quarterly basis determined by your accounting cycle. The return will contain the total value of local sales, exports, and purchases from GST registered entities as well as the GST collected and claimed. These returns are filed electronically and F5 forms are made available online at the end of each quarter.
IRAS needs to receive your return no more than a month after the end of your accounting period. If no tax is collected, a return declaring zero income is still required to be filed. Late returns incur a penalty regardless of whether the net GST declared is payable or refundable. Refunds are be made within 30 days of the date the return was submitted.
GST schemes to assist businesses
There are a number of assistance schemes for businesses which relate to the GST. These are designed to help ease cash flow problems and promote a pro-business environment. Some of the schemes include:
- The Tourist Refund Scheme allows tourists to claim back GST on purchased goods they are taking outside of Singapore
- The Cash Accounting Scheme is designed to ease the cash flow of small businesses with an annual revenue of under 1 million SGD
- The Gross Margin Scheme is where the GST is chargeable on only the gross margin of products
- The Major Exporter Scheme (MES) is to help major exporters with significant imports manage cash flow
- The Approved Contract Manufacturer and Trader (ACMT) scheme, companies are not required to charge GST if they have been instructed by an overseas purchaser to deliver finished goods to their Singapore customers.
- The Approved Marine Fuel Trader (MFT) scheme means marine fuel oil purchased from a local registered supplier does not attract GST costs
- The Hand Carried Exports Scheme is for zero-rate goods made to overseas customers which are carried out of the country vie Changi International Airport
- The Zero GST Warehouse Scheme allows businesses to cut red tape and bypass the administrative returns process by turning their warehouse into a zero-GST warehouse
- The Approved Third party Logistics Scheme removes GST costs for those who wish to import goods belonging to themselves or a principal partner overseas.
There are GST guidelines for each industry in Singapore developed by the tax department which provide you with specific information on how the GST operates in your sector.