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GST in Singapore

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If you are a business owner in Singapore, you need to understand GST. Don’t worry though, we’ve got a beginner’s guide for you that covers what it is, filing requirements with IRAS, as well as pros and cons of becoming a GST registered company.

What is GST?

GST stands for Goods and Services Tax, and is a consumption tax applied to all products and services in Singapore, including the importing of goods into Singapore.  GST is the same as Value Added Tax (VAT), which is present in other countries.  GST in Singapore is currently 7%.

How does Singapore GST affect your business?

When you are operating a GST registered company, you need to include GST in the prices for the goods and services that you are selling or providing, and then pay the collected GST back to IRAS.

 

GST usually doesn’t become an expense for the company. The cost of GST is usually passed down to the consumers indirectly, and businesses are just the middlemen collecting GST on behalf of IRAS (Singapore’s tax department).

Example: if your product costs $1,000, you charge your customer $1,070 ($1,000 for your service and an additional 7% GST tax of $70). You then pay this $70 to IRAS with GST tax filing every quarter.

Am I required to register for GST for my company?

GST is a type of self-assessed tax. That means you need to monitor whether you need to be registered for GST. There are two types of GST registrations:

Compulsory registration

Registering for GST is mandatory when:

  • your business turnover is more than $1 million in the past 12 months – this is called the retrospective basis, OR
  • you are expecting your business turnover to exceed $1 million in the next 12 months – this is called the prospective basis. This includes if you signed business agreements/contracts that will bring in revenue in the next 1 year.

When your revenue exceeds $1 million, you need to submit the GST application to IRAS within 30 days. Should you fail to register your business with IRAS within the deadline, you will be liable to penalties.

Voluntary registration

You can voluntarily register for GST even if you don’t need to yet. However, there are additional requirements if you register voluntarily. Once registered, you need to stay registered for a minimum period of two years.

 

That means you need to follow all GST regulations, such as filing the GST return on time in every quarter and maintain all your records for at least five years, even if your company ends all operations.

 

To register for GST, you need to submit a form (GST F1) together with all supporting documentation to IRAS. You’ll need to fill out an additional form (GST F3), if you are operating a partnership business.

Are there benefits to registering for GST?

Here are some of the benefits you can get for your business as a GST registered company.

  • The cost of operating your business goes down resulting in lower prices since the real taxpayer is the consumer and not the business.
  • You can establish more legitimacy to customers as most reputable companies are GST registered business.
  • GST taxes the self-employed workers and wage earners only when they consume, not when they earn. This makes GST a fair system.
  • GST does not tax on savings and investments, which helps to encourage people to save and invest more regularly.
  • GST that you incur on purchases can be claimed. This can aid a company in recovering expenses and lowering costs incurred.

Example when recovering GST costs:

Receive sales $1,000 → GST Payable $70
Make purchase $100 → GST Claimable $7
Total Net Payable to IRAS = $63

What are the drawbacks to registering for GST?

There are also a few disadvantages of registering for GST that includes:

  • Having the administrative liability of having to file the GST tax reports every year.
  • You need to understand the details of GST or pay someone else to do it (usually an accountant).
  • Adding GST onto your price tag increases your selling price. Some of your customers won’t be too happy, especially if they are not GST registered themselves.

How do I file GST returns?

As a Singapore GST registered business, you need to submit a return (GST F5) to IRAS in every quarter. You can also file your GST returns electronically via the IRAS website.

 

You have to indicate the following:

  • the total value of your sales, (international and local)
  • value of exports and purchases from GST registered entities,
  • the GST collected; and
  • GST claimed for that accounting period.

You need to ensure that IRAS receives your submission within 30 days after the end of your business quarter even if there are no taxes due. 

 

If you file your GST returns late, you can expect penalties regardless of whether the net GST declared is a payable or refundable amount. You will receive your GST refunds within 30 days from the date of receipt of the return.

Next steps

Don’t fall foul of your IRAS obligations once you register GST for your business – we can help you with the process. We’re always available for a chat, just fill out our contact us form and we’ll get in touch

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