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The Ultimate Guide to GST for Businesses in Singapore

26 Sep 2023  ·  Grof Writer
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The Ultimate Guide to GST for Businesses in Singapore
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One of the most important aspects of running a business in Singapore is understanding and complying with the Goods and Services Tax (GST) system. What exactly it is and how is it important to business owners in Singapore? Let’s find out together! 

 

What is Singapore’s Goods and Services Tax? 

Singapore’s Goods and Services Tax (GST) is a consumption tax levied on the supply of goods and services. Currently set at 9%, GST is imposed on most goods and services provided in Singapore, as well as on the importation of goods. The purpose of GST is to ensure a fair and sustainable tax system, while also providing revenue for the government to support public expenditure. 

 

What sets it apart from other taxes is its “multi-stage” nature. This means that GST is collected at each stage of the supply chain, from the manufacturer to the retailer, and ultimately to the consumer. This ensures that the tax burden is spread across the entire spectrum of economic activities, making it a broad-based tax system. 

 

Let’s delve deeper into the concept of GST and its impact on Singapore’s economy. The introduction of GST in Singapore dates back to April 1, 1994, when it was implemented at a rate of 3%. Over the years, the rate has gradually increased to its current 9%. This incremental approach allowed businesses and consumers to adapt to the tax system and minimise any sudden shocks to the economy. 

 

GST offers several key benefits for Singapore. It provides a stable source of government revenue, ensuring effective resource allocation and service provision. Additionally, it fosters transparency and fairness by taxing consumption, reducing income inequality. Moreover, GST supports Singapore’s economic competitiveness by keeping income tax rates low, attracting businesses and investors. 

 

When Does a Business Need to Register for the GST? 

Starting from 1 January 2019, businesses in Singapore must register for the GST if the value of their annual taxable turnover at the end of each calendar year (ending 31 December) is greater than $1 million. This is known as the retrospective view

 

You also must apply if you know that your taxable turnover will be more than $1 million in the next 12 months. This is known as the prospective view

You must present documentation to support the claim that your business will generate more than $1 million in taxable turnover in the next 12 months. These documents may include the following: 

  • Invoices to customers. 
  • Signed contracts. 
  • Confirmed purchase orders. 
  • Past income statements show that the annual turnover for the past 12 months is close to $1 million and is on an increasing trend. 

Who is Exempted from GST Registration? 

Companies that produce only zero-rated supplies can apply for an exemption from registration, this is still possible even in the case where your taxable turnover exceeds the registration limits. This allows you to avoid the administrative requirement of GST registration and subsequent quarterly GST filing. If more than 90% of your total taxable supplies are zero-rated and if your input tax is greater than your output tax, the exemption will be approved by IRAS. 

 

Other common exemptions include financial services, the provision of residential properties, the sale of investment precious metals, and the importation of investment precious metals. It is crucial to understand these exemptions and ensure that your business qualifies for them, as applying the wrong tax treatment can lead to penalties or additional tax liabilities. 

 

Can I Voluntarily Register for the GST? 

You can voluntarily apply for the GST if your business qualifies for it. To do so, IRAS states that you must satisfy one of the following criteria: 

  • Your business makes taxable supplies. 
  • Your business only makes out-of-scope supplies (Out-of-scope supplies refer to sales of goods in transit and those that didn’t enter Singapore). 
  • Your business makes exempt supplies of financial services that are also international services. 
  • Your business procures services from overseas service providers (you would not be entitled to full input tax credit even if you were GST-registered). 

 

Since you’re voluntarily applying to become a GST-registered business, you also have to show that you understand the obligations and responsibilities of this status. IRAS requires either the company director, sole-proprietor, partner, trustee, or preparer of the GST returns (whichever is applicable) to complete and successfully pass the two e-learning courses “Registering for GST” and “Overview of GST”. 

 

What are the Pros and Cons of Voluntary Registration? 

If your company’s suppliers are mostly GST registered, you will be at a disadvantage if your company is not GST registered. This is because you will not be able to charge GST on your products or services. 

 

If your company does not procure goods and services from GST-registered companies and is not required to register for GST, voluntary registration as a GST-registered company will incur additional administrative costs (such as costs for registration and filing). 

 

What are the Responsibilities of a GST-Registered Business? 

The main responsibilities of a GST-registered business are the following: 

  • Charge and account for 9% GST for goods and services made in Singapore 
  • File for and pay GST tax due. You must file GST returns and pay GST within one month of the end of each accounting period. Keep accurate business & accounting records for at least 5 years, even after the business no longer operates or has been deregistered from GST. 
  • Ensure that your price displays, advertisements, publications, or quotations regarding goods and services for sale always include GST. Failure to do this can make your business liable for a fine of up to $5,000. 
  • Always notify IRAS of any change to your business situation within 30 days of the change. 

 

Charging and claiming GST 

Only GST-registered businesses can charge and claim GST from their GST registration date. Non-GST registered businesses cannot charge or claim GST. 

 

Charging GST 

If you’re registered for GST, you have to add GST to the price of most things you sell, except for certain items where customers handle the GST. The GST you add is called “output tax,” and you need to pay it to IRAS within a month after your accounting period ends. 

 

If you accidentally charge or collect GST when you shouldn’t have, you must give that money back to IRAS. 

 

Claiming GST 

When you’re GST-registered, you have the opportunity to reclaim the GST you’ve paid on business purchases and expenses, including imports, by including it as input tax in your GST return. Of course, this is contingent upon meeting the conditions for claiming input tax. 

 

Furthermore, you might be eligible to recover GST incurred before your GST registration or incorporation, given that you satisfy specific criteria. This input tax credit system is designed to ensure that taxation applies only to the value added at each step of a supply chain. 

 

How to File GST Returns for Your Company 

GST Returns are now filed electronically. As a GST-registered entity, you are required to submit a return (GST F5) on a quarterly basis to the tax authorities based on your accounting cycle. When filing your return, you will indicate the following: 

  • Total value of your local sales 
  • Total value of Export Sales 
  • Purchases from GST-registered entities 
  • GST collected for that accounting period 
  • GST claimed for that accounting period 

 

Once you have started to e-file your GST F5, your next GST return will be made available online by the end of each accounting period. You can e-file your GST F5 one day after the end of the accounting period, whilst it is also possible to e-file your return within one month of your prescribed accounting period but no later, regardless of whether the net GST declared is a payable or refundable amount. However, even if there is no tax due for the said period, you must still submit a ‘nil’ return. 

 

Deregistration 

In order to be eligible to deregister your company, you can do so when your business stops its existing operations when your business is sold (as a whole) to another individual or when your sales figures do not surpass 1 million SGD. To deregister your company, you must submit an application form with other relevant documents to the tax authority no more than 30 days from the date of cessation. 

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Penalties for GST Non-Compliance in Singapore 

Non-compliance with GST regulations can result in significant penalties and legal consequences. The severity of the penalties depends on the nature and extent of the non-compliance. 

 

If a business fails to register for GST when required or intentionally evades GST, it may be liable to pay a substantial amount of tax, along with penalties and interest. Additionally, failure to file GST returns or late payment of GST may also attract penalties. 

 

It is essential to understand your GST obligations, keep updated with any changes in regulations, and ensure compliance to avoid unnecessary penalties. Compliance not only protects your business from legal repercussions, but it also fosters trust with your customers and suppliers. 

Reach Out to Grof 

Still unsure how to deal with your GST situation? Contact us to carry out a complimentary consultation to get your queries answered within 24 hours. Grof also offers professional services with our budget-friendly packages to help with the GST registration, GST filing and monthly bookkeeping for your company. 

 

  

Frequently Asked Questions 

Q: What is my GST Number? 

A: Your company UEN is your GST Number. 

Q: What happens if you don’t file GST? 

A: If you don’t file any GST return then subsequent returns cannot be filed. For example, if GSTR-2 return of August is not filed then the next return GSTR-3 and subsequent returns of September cannot be filed. Hence, late filing of GST return will have a cascading effect leading to heavy fines and penalties. 

Q: How long is the processing period to be registered for my GST application? 

 A: The Inland Revenue Authority of Singapore (IRAS) usually takes 10 working days to process your GST application. 

Q: Can I claim GST for my purchases incurred before I am GST-registered?  

A: Yes and No. You can claim GST for purchases incurred before GST registration for up to 6 months before registration. However, there are certain requirements of what is and is not claimable. You can claim unsold goods and inventory purchased within 6 months before GST registration. You cannot claim for intangible items such as cleaning services incurred before GST registration. 

 

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