Singapore’s Goods and Services Tax (GST) is an indirect tax, currently set at a rate of 9%. It applies to the sale price of goods and services provided by GST-registered businesses in Singapore. Importantly, GST is charged to the final consumer and usually does not constitute a cost for businesses. Businesses act as collection agents for the Singapore tax authorities.

 

 

What Does GST Mean for Singapore Companies?

GST-registered companies must charge GST on the goods and services they provide to their customers and remit the collected tax to the tax authorities. For example, if a GST-registered company charges a client SGD 100 for a service, it must issue an invoice for SGD 109 (SGD 100 service fee plus 9% GST). The GST amount collected on behalf of the authorities must then be paid quarterly to the Inland Revenue Authority of Singapore (IRAS).

 

Benefits and Drawbacks of GST Registration

Benefits:

    • Enhanced Business Image: GST registration signals to clients that the business is mature and of a certain scale.
    • Lower Operating Costs: Since the ultimate taxpayer is the end consumer and with the multi-stage credit mechanism, businesses do not bear the tax cost.
    • Price Advantage: Companies charge output tax (GST collected from customers) and offset it with input tax (GST paid to suppliers). The net amount remitted or refunded helps reduce costs.

Drawbacks:

    • Administrative Burden: Companies need to understand GST complexities or hire accountants, which may increase operating costs.
    • Price Increase: GST registration effectively raises a company’s sales prices by 9%. Non-GST-registered customers cannot reclaim the GST paid, which may affect their willingness to purchase.

 

GST Registration Process

    1. Determine Eligibility: This includes company registration proof, articles of association, director and shareholder information, financial data, and bank account details.
    2. Online Application: Register online via IRAS’s website and fill in the required business information.
    3. Submit Application: Upload all necessary documents, ensuring accuracy.
    4. Approval: IRAS reviews applications, typically taking 10 to 14 working days.
    5. Receive GST Registration Certificate: Once approved, the company receives a GST certificate and registration number. The GST number must be indicated on all invoices and receipts, and the company must begin filing GST returns and payments as required.

 

GST Registration Requirements

Companies incorporated in Singapore are not automatically registered for GST. Businesses must apply to IRAS to become GST-registered if they meet certain conditions:

Compulsory Registration:

    • Businesses with a turnover exceeding SGD 1 million in the past 12 months.
    • Businesses reasonably expecting turnover to exceed SGD 1 million in the next 12 months.
      Companies must apply within 30 days of meeting these conditions.

Voluntary Registration:

Businesses that do not meet compulsory registration thresholds may still register voluntarily, depending on operational needs. The business must have a sales plan or have begun taxable supplies in Singapore.

*Note: Voluntary registrants must meet additional conditions and remain registered for at least two years. They must comply with GST regulations, file quarterly returns, and keep records for at least five years, even if operations cease or registration is canceled.

 

Differences in GST Applications for Businesses Based on Turnover

    • Below SGD 1 Million: Businesses may opt not to register. However, if turnover is expected to exceed SGD 1 million or if engaged in specific GST-requiring activities, they should consider early registration.
    • At or Above SGD 1 Million: Businesses are legally required to register for GST or face penalties. Once registered, they must regularly file GST returns and remit taxes to IRAS.

Key Considerations for GST

    • Accurate Record-Keeping: Maintain precise records of all sales and purchases, including dates, amounts, and GST rates, to facilitate audits.
    • Invoice Management: Ensure invoices meet IRAS requirements, including clear GST amounts and tax identification numbers.
    • Audit Preparedness: Regularly conduct internal audits and keep all relevant documents ready for IRAS audits.
    • Policy Updates: Monitor IRAS announcements for policy changes and adjust tax strategies accordingly.

 

 

Conclusion

The strategy and compliance considerations surrounding GST registration are crucial for businesses operating in Singapore. Companies should assess their circumstances, weigh the benefits and drawbacks, and plan tax strategies accordingly. Staying informed about IRAS policies and ensuring compliance will help businesses navigate Singapore’s tax environment effectively. This guide aims to provide valuable insights to help you succeed in managing GST in Singapore. For any questions on Singapore GST registration, please contact us with hesitation.