As a business owner in Singapore, it is essential to stay updated on the latest financial regulations and changes that may impact your operations. One such change that requires careful consideration and preparation is the upcoming Singapore Goods and Services Tax (GST) rate increase in 2024. After all, the time is running out for businesses nationwide to upgrade their financial systems, as the first hike is just over a month away. 

 

In this comprehensive guide, we will delve into the key details surrounding the GST rate change, providing you with valuable insights and actionable tips to navigate this transition successfully. 

 

Understanding the Current State of Singapore GST 

Over 100,000 businesses have successfully transitioned to the new GST rate this year, according to the Inland Revenue Authority of Singapore (IRAS). However, approximately 60 businesses initially charged the incorrect GST rate or displayed incorrect pricing, but they quickly rectified these errors. It’s important to note that payments received in 2023 are subject to the current 8% GST rate, even if the goods or services will be provided after January 1, 2024. 

 

Businesses should also allow ample time for their IT teams or software vendors to update their systems, including accounting, invoicing, and cash registers, to accommodate the upcoming 9% GST rate change. 

 

💡 If you’re unsure about the ins and outs of GST, check out our comprehensive guide, ‘The Ultimate Guide to GST for Businesses in Singapore’, for all the information you need.

 

Impact on Inflation 

When the Singapore GST rate goes up, we’re likely to see inflation rates rise too, especially at first. As everyone – both businesses and customers – gets used to the new rates, there might be some uncertainty in the market, and people might spend less for a while. But, as things settle down, businesses should start seeing some benefits from the rate increase. 

 

HSBC says that if the Singapore GST goes up by 1%, inflation could jump by about 0.5-0.7% in 2023 and 2024. And if Singapore’s GST goes up by 2%, inflation could climb by 1% or even more. It’s really important for businesses such as yourself to get ready for this inflation bump and think about how they might need to change their prices. 

 

Impact on Consumer Spending and Business Revenue 

When the Singapore GST goes up, it affects shoppers and businesses differently. As a tax on domestic consumption, GST ultimately becomes a tax on customers. Businesses that are registered for GST have to collect this tax from their customers and give it to the Monetary Authority of Singapore (MAS). 

 

With the Singapore GST rate set to change, people might start to think more carefully about spending on big items. This could mean a drop in spending at the start of 2024. But, there’s a chance people might try to buy big-ticket items before the end of 2023 to save a bit before the GST increase. 

 

For businesses, this shift in how people spend could lead to less income for a while. But, things should balance out eventually, with spending going up again. Businesses need to tweak their strategies to make the most of this shift. 

Dealing with Increased Costs for SMEs 

For businesses, especially SMEs, a higher GST rate means higher costs, unless they can get back some of that money as Singapore GST tax credits. This rise in costs can be tough, especially for small businesses already worried about their growing expenses. 

 

To handle these higher costs, small businesses need to find smart ways to cut expenses. It’s important for companies of all sizes to get ready for the Singapore GST change as soon as they can. Some are already changing how they handle their finances to be ready for the new rates. 

 

Must-dos for Singapore GST Compliance 

To ensure compliance with the upcoming Singapore GST rate change, businesses need to take certain essential steps. These steps include updating systems, reviewing existing contracts, considering voluntary GST registration, and introducing additional measures to manage the risks associated with the transition. 

 

Update Your Systems 

One of the first steps businesses should take is to audit and review their current finance management systems and processes. It is crucial to ensure that these systems have been updated to account for the new GST rates. If businesses are using finance management platforms like Grof, updating systems should be relatively easier due to strong integration with accounting tools. Businesses should communicate with their partners to ensure they are on the same page and ready for the switch on 1st January 2024. 

 

If you’re handling your business finances, it’s really important to do a detailed check to make sure you’re following all the rules and avoid any fines. Key areas to focus on during the review include invoicing, payables, and price displays. 

 

Invoicing: 

 

• Ensure all invoices list the GST at 9%. 
• Consider transitional time of supply rules.  

Payables: 

 

• Update accounts payable workflows, processes, and systems for the new GST rate. 
• Be mindful of the transitional time of supply rules. 
• Flag any invoices that still show the old 8% rate.  

Price Display: 

 

• For product-based businesses, ensure all price displays (physical or online) include the new GST rate. 
• Make sure all prices quoted, whether in writing or verbally, are GST-inclusive.  

 

Review Existing Contracts with Current Partners or Suppliers 

If you’re working with vendors or suppliers, especially if you have yearly software-as-a-service (SaaS) subscriptions or long-term contracts, it’s time to figure out how the new GST rate will affect these deals. It’s a good idea to talk to your vendors to see how they’re updating their systems and if you need to do anything on your end. 

 

Some vendors might update their systems on their own and give you guides to help you adjust. But for more complicated changes, you might need to update your contracts together. Make sure to sort this out before January 1st to avoid any mix-ups or issues with not following the rules. 

 

Voluntary Singapore GST Registration 

Usually, businesses in Singapore need to register for GST only if they make more than S$1 million a year or expect to in the next 12 months. If you’re not registered for GST, you don’t have to sign up, but you also can’t get back the GST you pay on your business expenses, subscriptions, or contracts. 

 

💡 Unsure about filing GST returns for your company? Check out our blog to learn everything you need to know! 

 

With the GST rate going up, the costs for businesses not registered for GST might also increase. To stop these extra costs from leading to higher prices for their customers, these businesses might think about signing up for GST voluntarily. But, it’s important to weigh the pros and cons first. Consider the rules you’ll need to follow and how it could affect your prices 

 

Additional Measures for Singapore GST Compliance 

Adding extra controls to handle the risks from the new GST rate change is a smart move. You should think about having training sessions in your company to teach your team about the upcoming changes.  

 

Moreover, business owners should keep proper business and accounting records for at least 5 years to support GST declarations. After all, maintaining accurate and thorough records is not just good practice but also essential for audit preparedness and meeting quarterly Goods and Services Tax (GST) filing requirements. Good record-keeping ensures that your business can accurately track and report financial transactions, which is crucial for complying with tax laws and regulations. It also provides a clear financial history of your business, aiding in more informed decision-making. 

 

Additionally, the complexity of accounting, particularly GST, can be quite burdensome. Outsourcing this task to professionals can save significant time and prevent the headaches associated with ensuring compliance and accuracy. Specialists in this area are well-versed in the nuances of tax laws. They can handle these responsibilities efficiently, reducing the risk of errors and the stress associated with audits and tax filing. 

 

This way, everyone will know what’s coming and be ready for 2024. 

 

The Importance of Singapore GST Compliance Moving Forward 

By 2024, GST is expected to be Singapore’s second-biggest source of tax revenue, just after corporate income tax. Thanks to Singapore’s wide-ranging GST system and business-friendly corporate tax policies, GST’s share in tax revenue is set to increase over time. 

 

As GST becomes more important, the Monetary Authority of Singapore (MAS) is likely to pay closer attention to GST compliance. Businesses that don’t follow the rules, whether on purpose or by accident, could face tougher penalties. With more goods and services getting added to GST from 2023, GST will be a key focus for both the government and businesses in the next couple of years. 

 

So, it’s crucial for businesses to get ready for the upcoming GST rate change now. This means reviewing and updating systems, making sure contracts with partners and suppliers are clear, thinking about signing up for GST voluntarily, and adding extra measures to comply with GST rules. By being proactive and doing these things, businesses can make sure they handle the transition well and avoid any big problems. 

 

Need Help with GST? 

If you’re still feeling uncertain about handling your GST needs, don’t worry – we’re here to help. Reach out to us for a free consultation. At Grof, we also provide affordable professional services, including GST registration, GST filing, and monthly bookkeeping, tailored to your company’s needs. Let us take the stress out of your GST and accounting tasks.