What you know about GST so far is probably from the point of view of a consumer – sometimes, you need to pay an additional 7% on top of the prices of the goods and services you purchased. And that at some point in the near future, the government will increase that percentage to 9.
But how does it work on the company side? What does the company do after it collects the tax? Does your company need to register for GST? In this article, we’ll lay out everything you need to know about GST in Singapore and discuss how it affects your company.
What Is GST?
GST is a consumption tax introduced in 1994 on goods and services produced in Singapore or imported into Singapore, and are purchased and consumed here. Known as the Valued-Added Tax (VAT) in other countries, it is an indirect tax, and its prevailing rate is 7%.
However, there are exemptions to GST. These include:
- Provision of most financial services;
- Sale and lease of residential properties; and
- Importation and local supply of investment precious metal.
International services and goods that are exported also do not need to pay GST.
How Does It Work?
GST is charged to the end consumer, and your business is merely the collecting agent of the Inland Revenue Authority of Singapore (IRAS). Hence, it is not an expense or a revenue stream to your company that is supplying the goods or services.
Does Your Company Need to Register for GST?
If your business meets the following criteria, it must register for GST:
- Taxable turnover for the past 12 months ending March, June, September or December is more than SGD1 million; or
- It is making or intend to make taxable supplies, and it can reasonably expect its taxable turnover in the next 12 months to be more than SGD1 million (e.g. signing of a major sales contract or business agreement).
Your business can choose to voluntarily register for GST even if its taxable turnover does not exceed SGD1 million. However, you’ll need the Comptroller’s approval. Once your company is approved, it has to remain registered for at least two years and comply with all GST regulations.
My Business is Not A Local Company. Do I Still Need to Register for GST?
In Singapore, the same rules of GST registration apply to both local and overseas entities. So even if your business is not a local company (i.e., not a resident in Singapore and/or does not have an established place of business in Singapore), you still need to apply for registration if it meets the above criteria.
To register for GST, you need to appoint a local agent here. This agent should also be responsible for the accounting and payment of GST for your company.
How Does My Company Register for GST?
You can register with the Inland Revenue Authority of Singapore (IRAS) for GST, and it’s a simple process:
Step 1: Submit Application to IRAS
You can only do so online via myTax Portal. Remember to have your company CorpPass and supporting documents (here’s a checklist) ready in softcopy. IRAS usually takes ten working days to process your application.
Step 2: Receive Notification of Effective Date of Registration
Once it’s been approved, you’ll receive a letter of notification. In the letter, you’ll find:
- Your business’s GST registration number – You’ll have to print the number on your invoices, credit notes and receipts.
- Your business’s Effective Date of GST Registration – This is the date when you have to start charging and collecting GST.
How Do I Collect and Claim GST for My Company?
Once your business has registered for GST, it must apply the prevailing GST tax rate for all its products or services. The GST that is charged and collected is known as output tax, and it must be returned to IRAS. This is usually done quarterly. You need to submit the GST return to IRAS one month after the end of each prescribed accounting period.
Input tax is the GST that is incurred when your business purchases from GST-registered suppliers or imports goods into Singapore. Your company can claim input tax if it meets the following conditions:
- Your company’s input tax is claimed during the accounting period that corresponds to the date shown on the tax invoice or import permit or based on the date that you post/process the tax invoice or import permit into your accounting system if you satisfy the qualifying conditions.
- You must repay the input tax previously claimed to the Comptroller if you do not pay your supplier within 12 months of the due date of payment.
- Generally, the input tax incurred in the making of exempt supplies is not claimable unless the De Minimis Rule is satisfied. The De Minimis Rule allows GST-registered businesses to claim input tax on exempt supplies.
Once your business is GST-registered, you can claim GST that has incurred before registering for GST and even before incorporation, provided certain conditions are met.
When claiming for GST, your company should report both its output tax and input tax in its GST returns. The difference between the output tax and input tax is the net GST payable to or refunded by IRAS.
How Do I File GST Returns for My Company?
To file GST Tax Returns, you need to use the GST F5 tax return and submit to IRAS electronically via myTax Portal either monthly or quarterly. You still need to file a nil return even if there are no GST transactions during an accounting period.
Remember to report both input and output tax. When filing an F5 return, you must first calculate its net GST by taking the company’s output GST minus its input GST. If the output tax is greater than the input tax (i.e. negative net GST), then you must pay IRAS the net GST, which must be done within one month of filing. On the other hand, if the input tax is greater than the output tax (i.e. positive net GST), IRAS will refund you the amount within one to three months of filing the F5 return.
For more details, you may also refer to the e-Tax guide on How Do I Prepare My GST Return.
What If I Fail to Submit My Company’s GST Returns?
IRAS imposes a 5% late payment penalty for late submissions with a demand note to make the outstanding payment. If your company fails to pay after 60 days from the date of the demand note, IRAS may add 2% penalty each month up to 50%. Thus, a total maximum penalty for late GST payments is 55%.
Mistakes in Import Declarations
If your company has made any mistakes in import declaration, such as over-declaring or under-declaring the value of its import, you should declare these mistakes in your company’s GST returns. For detailed instructions on how to do so, please refer to the IRAS webpage.