A Quick Insight That You Need To Know About Goods And Services Tax (GST) In Singapore

The Goods and Services Tax (GST) is a comprehensive consumption tax applied to the majority of goods and services that are either imported or provided within Singapore. In various other nations, it goes by the name Value-Added Tax (VAT). Presently, the GST rate in Singapore stands at 8% in Singapore.

GST Rate Hike

In view of the upcoming increase in the GST rate from 7% to 8% on January 1, 2023, and to 9% on January 1, 2024, GST-registered businesses are strongly encouraged to start preparing early for a smooth transition. This includes reviewing and updating their GST accounting systems and procedures, as well as communicating the new GST rates to their customers and suppliers.

GST transitional rules will apply to supplies that span the change in GST rate. For example, if a business issues an invoice for a supply in 2023 but the supply is not completed until after January 1, 2024, the business will need to reissue the invoice to charge GST at the new 9% rate.

GST Registration In Singapore

Businesses should consult the Inland Revenue Authority of Singapore (IRAS) for more information on the GST rate hike and the transitional rules.

In Singapore, all companies are obligated to register for GST if their taxable revenue surpasses S$1 million or is projected to surpass this threshold within the next 12 months. Companies are required to initiate their GST registration process within 30 days of becoming eligible.

Additionally, businesses have the option to voluntarily apply for GST registration, subject to approval by the Inland Revenue Authority of Singapore (IRAS). Once granted, businesses must maintain their GST registration for a minimum of two years.

GST Charging And Collection

Upon successful registration for GST, it becomes imperative to levy GST on your supplies at the prevailing rate. This is referred to as output tax, and it must be remitted to the Inland Revenue Authority of Singapore (IRAS).

On the other hand, the GST incurred on your business-related acquisitions and expenditures, including imports, is termed as input tax. If your business meets the criteria for input tax claims, you are eligible to request a refund from IRAS.

This mechanism of input tax credit is designed to ensure that only the value added is subject to taxation at each juncture within a supply chain.

Types Of Supplies In Singapore

In Singapore, there are generally four distinct categories of supplies:

Standard-Rated Supplies (GST at 8%)

This category encompasses the majority of local sales of goods and services.

Zero-Rated Supplies (GST at 0%)

Zero-rated supplies pertain to the export of goods and international services.

Exempt Supplies (GST not applicable)

Exempt supplies include:

• Sale and rental of unfurnished residential property
• Importation and local supply of investment precious metals
• Financial services

Out-of-Scope Supplies (GST not applicable)

Out-of-scope supplies cover:

• Sales where goods are dispatched from overseas to another overseas location
• Private transactions

Additionally, there is a planned 2% GST rate increase, set to be implemented at some point between 2021 and 2025. The timing of this hike will depend on various factors, including the state of Singapore’s economy, government expenditure, and revenue generated from other taxes.

Time of Supply Rules Applicable From January 1, 2011

Starting from January 1, 2011, for the majority of transactions, the calculation of output tax will be determined by the earlier of the following events:

• The issuance of an invoice.
• The receipt of payment.

Conditions For Input Tax Claim

• To be eligible for input tax claims, the following conditions must be met:
• Your business is registered for GST.
• The goods or services must have been either supplied to you or imported by you.
• The goods or services are intended for use in or will be used for your business operations.
• Local purchases require valid tax invoices addressed to you, or simplified tax invoices at the time of input tax claim.
• Imports must be supported by import permits indicating you as the importer of the goods.
• The input tax is directly linked to taxable supplies, such as standard-rated supplies and zero-rated supplies, or out-of-scope supplies that would be taxable supplies if conducted within Singapore.
• Input tax claims do not fall under the disallowed categories specified in Regulations 26 and 27 of the GST (General) Regulations.

Tax Invoice

A tax invoice serves as the primary document for substantiating an input tax claim, and it should be retained for a minimum of five years. It’s important to note that tax invoices do not need to be included when submitting your GST returns.

When dealing with GST-registered customers, a tax invoice should be issued within 30 days of the supply transaction. However, it’s worth noting that tax invoices are not necessary for zero-rated supplies, exempt supplies, deemed supplies, or transactions involving non-GST registered customers.

Disallowed Input Tax Claims

Certain expenses cannot be claimed as input tax in accordance with Regulations 26 and 27 of the GST (General) Regulations. These expenses include:

• Benefits provided to family members or relatives of staff.
• Costs and operational expenses related to privately registered motor cars.
• Membership fees, including transfer fees, are imposed by sports and recreation clubs.
• Expenses incurred on company cars with a Certificate of Entitlement (COE) renewed or extended on or after April 1, 1998.
• Expenses incurred on rental cars hired for use on or after July 1, 1999.
• Medical expenses for staff, unless mandated by the Work Injury Compensation Act or a collective agreement under the Industrial Relations Act.
• Premiums for medical and accident insurance for staff, unless such insurance or compensation is obligatory under the Work Injury Compensation Act or a collective agreement under the Industrial Relations Act.
• Any transactions involving betting, sweepstakes, lotteries, fruit machines, or games of chance.

Employee-incurred Expenses On Behalf Of The Company

In most cases, claiming input tax for purchases is contingent on having tax invoices addressed to your company’s name. However, exceptions can be made if you can substantiate that your employee was acting as an agent of your company (i.e., the taxable entity) when procuring goods or services.

To establish this, it’s crucial to maintain evidence of reimbursements made to the employee and to categorize the associated bills as business expenses in your financial records.

Please be aware that certain conditions apply to your input tax claims:

• Your business must be registered for GST.
• The goods or services should be intended for or already used in the course of your business.
• The input tax should be directly linked to taxable supplies or out-of-scope supplies that would be taxable if conducted in Singapore.
• The input tax claims should not encompass expenses prohibited under Regulations 26 and 27 of the GST (General) Regulations.

GST Online E-learning Courses

To voluntarily register for GST in Singapore, company directors, sole proprietors, partners, and trustees must complete two e-learning courses: “Registering for GST” and “Overview of GST.” They must also pass the quiz at the end of each course.

It is advisable to complete both courses to better understand the Singapore GST system.

GST Update: Customer Accounting For Prescribed Goods

Commencing January 1, 2019, the application of customer accounting has become obligatory for relevant supplies of prescribed goods directed toward GST-registered customers for their business needs. These prescribed goods include items such as mobile phones, memory cards, and off-the-shelf software, which are frequently implicated in fraudulent activities.

GST On Imported Services

Effective January 1, 2020, GST will be implemented on imported services.

Reverse Charge for Business-to-Business (B2B) Imported Services

GST-registered businesses that do not qualify for full input tax credits or GST-registered charities and voluntary welfare organizations receiving non-business receipts will be obligated to account for GST on all imported services, treating themselves as the supplier, with certain excluded services being exceptions.

These entities will have the opportunity to reclaim the GST as input tax, in accordance with standard input tax recovery regulations.

It’s worth noting that the reverse charge mechanism primarily impacts businesses engaged in taxable supplies, and most businesses will not be affected by this change.

Overseas Vendor Registration Regime For B2C Digital Services

Businesses outside of Singapore are required to register for GST in Singapore if they have an annual global turnover exceeding $1 million and make B2C supplies of digital services to customers in Singapore exceeding $100,000.

Once registered for GST, businesses must charge and account for GST on B2C supplies of digital services made to customers in Singapore.

GST Update: Digital Payment Tokens Supply

Effective from January 1, 2020, the utilization or transfer of digital payment tokens for the purpose of payment, except for fiat currency or other digital payment tokens, is considered exempt from GST regulations. This means that GST is not applicable when digital payment tokens are employed to acquire goods and services.

The subsequent activities involving digital payment tokens are regarded as exempt supplies for GST purposes:

• The exchange of digital payment tokens for fiat currency or other digital payment tokens.
• The provision of loans using digital payment tokens.

For a token to qualify as a digital payment token, it must possess all of the following characteristics:

• Expressed in units.
• Designed to be fungible, meaning each token is identical and interchangeable with any other token of the same type.
• It is not tied to any specific currency and is not linked to any currency by its issuer.
• Can be electronically transferred, stored, or traded.
• It is or is intended to be, a medium of exchange widely accepted by the public or a segment of the public, with no substantial usage restrictions.

Digital payment tokens do not encompass:

• Traditional currency (fiat currency).
• Items that, if supplied, would be exempt supplies classified as financial services.
• Items that grant entitlement to receive or direct the provision of goods or services from specific individuals, and cease to function as a medium of exchange after the entitlement has been exercised.

Notable examples of digital payment tokens encompass Bitcoin, Ether, Litecoin, Dash, Monero, Ripple, and Zcash.

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