Good and services tax
On 1 April 1994, Singapore introduced a consumption tax on goods, services and imports sold domestically.
In other countries, GST is also known as VAT.
It is a multi-stage transaction tax on consumer behaviour designed to tax the value added at each stage of the transaction.
Why should I register for GST?
Most companies register to collect excise taxes to recover the consumption tax they paid when they bought goods.
When the consumption tax paid exceeds the GST charged, the company may request a difference from the Internal Revenue Service of Singapore as a refund of the consumption tax.
When the GST charged exceeds the consumption tax paid, the difference needs to be referred to the Inland Revenue Authority of Singapore (IRAS).
The greatest advantage of registered GST is that a company can use the consumption tax charged to consumers to compensate for the consumption tax paid when purchasing goods.
If you are not a business registered with GST, you cannot apply for a deduction for consumption tax on goods or services purchased.
Which Singapore companies need to register for GST?
Companies with taxable income of more than S$1 million in the year, or companies with taxable income expected to exceed S$1 million, are required to register for GST.
The business must register the GST within 30 days of fulfilling its responsibilities.
Companies registered as GST:
- You must submit your GST return to IRAS within one month of the end of each defined fiscal period, usually quarterly.
- You should report your sales and entry taxes on your GST return
- The difference between sales and entry tax is the net GST payable to or refunded by the IRAS.
Can I voluntarily choose to register for GST?
Companies can apply to the Director of Excise (Comptroller of GST) for a voluntary consumption tax.
The approval of the application is up to the Administrator.
Once the application is approved, the company must maintain its registration status for at least two years.
Exemption from registration
You will not be required to register for GST if:
1) More than 90% of your taxable turnover comes from “zero tax supply” and you can choose to apply for exemption from registration.
2) You should register for GST based on last year’s income, but do not expect to meet the GST registration criteria next year, you can apply for exemption, but must meet the following conditions:
- You are certain that the taxable turnover for the next 12 months will not exceed 1 million
- Taxable turnover is expected to decrease due to specific circumstances (e.g., large-scale downsizing of the business)
- You have supporting documentation to confirm your forecast;
- Nevertheless, you must continue to monitor your taxable turnover at the end of the next quarter or in the next calendar year.
Business record-keeping conditions
7 years of business records, or all transactions related to GST, need to be kept. Records include tax invoices, receipts, and credit documents.
GST billing and collection
Once the consumption tax is registered, it must be levied at the current rate of consumption tax on goods. This GST, which is billed and charged, is called an output tax and must be collected and paid to the IRAS
The consumption tax you generate on business purchases and expenses, including imported goods, is called input tax.
If your business meets the criteria for claiming a feeder tax, you can claim a feed tax on your business purchases and expenses.
This entry tax credit mechanism ensures that VAT is taxed only at each stage of the supply chain.
When to declare GST?
The standard procedure for companies to file excise taxes is every 3 months (quarter).
You can apply to the IRAS for a monthly or semi-annual declaration, and approval is up to the IRAS.
The difference in consumption tax must be paid by the last day of the reporting period, i.e. within one month of the tax accounting period.
For example, if the GST is submitted every three months and November 30, 2021 is the last day of the quarter, the final filing period is December 3, 2021。
If goods and services tax is not received before the due date, a fine of 5% will be imposed for each full month of unpaid tax, followed by a fine of 2% per month (not exceeding 50% of the unpaid tax).