GST – Goods and Services Tax

Goods-and-Services-Tax

Goods and Services Tax also known as the GST,  and is represented as Singapore’s own signature VAT system. As of now the GST is charged at a flat rate of 7%. As per IRAS, voluntarily registering a company for GST is always beneficial. The costs of doing business are substantially reduced if a business entity is properly GST register. Either for GST registration or for GST filing, you can blindly rely on SingaporeAudit.com.sg for we provide exceptional GST related services.

Goods and Services Tax is an indirect tax. It is levied to reduce dependence of the Singaporean economy on direct taxes such as corporate income tax and personal income tax.

What is GST?

On April 1, 1994, the Singapore government introduced Goods and Service Tax (GST) on the supply of goods and services within Singapore. It also applies to imports of goods in Singapore. In some other countries, it is also known as Value-added Tax (VAT). The current rate of GST is 7%.

GST for a Singapore Company

Being a GST registered company does not mean that the company pays the GST tax by itself. GST is paid by the consumers on the imported or purchased goods or services. The service provider or the company merely collects GST on behalf of government and afterwards deposits it with the IRAS. The above said procedure helps Singapore incorporated companies a great deal in complying with the GST laws put forth by the IRAS.

Methods of GST Registration in Singapore

A thorough self-assessments is very much necessary before any company decides to voluntarily register for GST. Usually applying GST registration parameters to the ongoing business activities helps a great deal in identifying whether or not a specific business  need to register for GST. Depending on the assessment a company has two choices ether going for compulsory or to go with the voluntary GST registration.

Compulsory Registration:

  1. Businesses exceeding turnover S$1 million in the past 12 months are required to opt for compulsory GST registration.
  2. Besides, if a particular business predicts its turnover is going to exceed S$1 million mark in the next 12 months, then also such businesses have to go for compulsory GST registration.
  3. On the other hand, businesses even after predicting their turnover won’t exceed S$1 million can opt for voluntary GST registration.
  4. A business entity supplying goods or services out of Singapore must compulsory register for GST.

Voluntary Registration:

  1. Voluntary GST registration is much beneficial to the companies supplying or selling Zero-Rated supplies. Such business entities have an option to claim for GST exemption, even if their turnover exceeds S$1 million.
  2. The benefit of voluntary GST registration in Singapore is that it enables a company to claim input tax it paid on its purchases from its suppliers.

Cancelling GST Registration:

To initiate the cancellation process the company has to approach the concerned authorities and submit a form with relevant documents. There are two situations when a company would like to cancel its GST registration.

a)    When a company stops its business activities or when it is sold off to another entity.

b)    When the company’s sales figure drops to less than 1 million SGD.

A company pays GST to its suppliers on the receipts of supplies and collects GST from its customers for services rendered or against goods sold. In the real world, the tax amount company pays to its supplier is called as input tax and the tax that it collects from its customers is output tax. So the company claims or pays the difference between input and output tax.

Pros and Cons of GST Registration

PROS:

In Favor of Government

  • GST ensures that only those people who benefit from the goods or the services are taxed.
  • Introduction of GST helped the Singapore government in reducing the rates of corporate and personal income taxes. This in turn attracted huge foreign direct investment to Singapore.
  • It brings in a steady and predictable inflow of revenue.
  • Collection and submission of GST in Singapore is done by the service providers, enabling it as an efficient tax system

In Favor of Businesses and Individuals

  • The Singapore GST registration requirement is applicable to the companies having a specific turnover on a yearly basis. A GST registration; thus, enables these businesses to gain recognition and establish a reputation.
  • GST is applicable to consumers only when they are  spending money to purchase goods or services.
  • Any particular saving or investment incurred by a normal Singaporean is not chargeable under Singapore GST laws.
  • Since the consumer is a real tax payer being GST registered entity significantly reduces the cost of doing business.

CONS:

  • GST registration in Singapore makes businesses take on additional GST related tasks.
  • It becomes necessary to hire an accountant having thorough knowledge of GST after registration.
  • GST resisted suppliers might lose their non GST customers.
  • Low income consumers of services and goods need to pay additional 7% charge apart from the normal price of the goods if the seller is a GST registered entity.

Types of Goods and Services Subjected to GST

Goods and services that are made or that originate in Singapore are taxed with GST. These taxable supplies are of two types; standard-rated and zero-rated.

  • Standard-Rated Supplies: Locally sold goods and services are of this type. Usually 7% GST is chargeable on their purchase.
  • Zero-rated Supplies: The goods and services that are exported are considered as zero rated supplies. Such supplies are exempted from GST. Besides, the manufacturer has the freedom to claim for rebates on input tax levied on his inputs of supplies.
  • Exempt Services: GST is also not charged for exempt services. These include sale and lease of residential land and financial services. Thus the provider of exempt supplies cannot claim the input tax.
  • Out-of-Scope Supplies: These supplies are out of the  scope of the GST. Suppliers or service providers who-
    • Carry out private transactions
    • Sells their goods outside Singapore
    • Sells their goods or services within zero-GST warehouses

Process of GST Registration Singapore

Form F1 has to be duly filled by an individual or a business entity willing to register for GST. If the business or a company is in partnership then submitting Form F1 along with F3 is very much necessary. The form F3 offers all the relevant details of partners as well the partnership firm.

The GST registration forms for overseas companies, group registrations, and divisional registrations are different. The application form from overseas companies must accompany with a letter elaborating on the GST registration. However, IRAS recommends hiring a local agent to process the GST registrations.

It takes about three weeks to complete the entire process of GST registration. Upon successful registration the company receives a ‘notification of GST registration’ letter. This letter along with other details contains the GST registration number, the GST filing frequency and due dates for filing and paying GST. From this point onwards, the company must file its GST electronically.

The process of Payment, Chnarging and Implementing GST

  1. GST is applied to the goods supplied in the local Singaporean market.
  2. The GST must be deposited with the IRAS.
  3. The 7% of GST is calculated either excluding the original price of the product or as a GST inclusive price wherein the GST is already added to the original price of the product.
  4. If the product price is inclusive of GST, then the trader has to mention same clearly on the product. Failure to do so might result in penalties and fines.
  5. In case of F&B industry, prices communicated to the  clients can be GST-exclusive.
  6. If a transaction takes place between two GST registered entities, then a proper tax invoice have to be issued by the party receiving funds so the payee can claim back paid GST or the input tax.
  7. In such cases, the tax invoices should be retained by both the entities/parties for at least 5 years.
  8. A printed and duly signed bill, in place of a tax invoice, can also be issued when a payment is made.
  9. Input tax claims should be according to the date of the tax invoice or import permit.

Process of Filing GST Returns

Normally, the electronic GST filing has to be carried out on a quarterly basis. The e-Filing or quarterly filing is initiated by filing GST F5 form. This form contains information related to company’s details such as, total value or total  local sale, exports, and purchases from GST registered entities, the GST collected and GST claimed for the accounting period. Correctly filled form helps in accurately providing relevant information to the tax authorities.

GST can be e-filed at the end of each accounting period and must reach IRAS within a month. If the GST to be filed comes out as ‘NIL’, still the company is required to file a ‘‘NIL’ GST return. If the GST refunds claimed by the company are valid, then such amount is refunded within 30 days from the date of receipt of GST return. Late fees and penalties apply to offenders.

Schemes of Goods and Services Tax Singapore

Major Exporter Scheme (MES): The MES has been introduced by the Singapore government in order to ease the cash flow of major exporters having substantial imports. With effect from 1 January 2015, to qualify for the MES re-import goods that you already have exported overseas for value-added activities and belonging to either one of your local customers or GST-registered overseas customers  if the requirements mentioned in the section 33B regarding claiming GST on re-import of value added goods are satisfied.

  1. Zero-GST Warehouse Scheme: With the help of this scheme, you can get your zero-GST warehouses, approved by the Singapore customs department for the GST-free import of non-dutiable goods.
  2. Cash Accounting Scheme (CAS): The CAS assists in easing the cash flow of small businesses that have an annual turnover below S$1 million.
  3. Third Party Logistics (3PL) Scheme: If you are offering logistics services to your foreign clients, who in turn use Singapore as a logistics hub, then you are exempt from GST Singapore.
  4. Hand Carried Exports Scheme: If you hand-carry the goods out of Singapore via Changi International Airport, your supply of goods becomes GST free.
  5. Tourist Refund Scheme: With the help of this scheme, tourists can claim a refund on the GST they paid for the goods they bought in Singapore.

We, at Singapore Taxation, assist in GST Singapore registration and work as local agents for our clients. We also assist in providing guidance and assistance for the GST calculation, GST form completion formalities and monthly/quarterly GST returns to the IRAS.

Please feel free to contact us on +65-6536 0036 or drop in an email at info@singaporeaudit.com.sg

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