The Goods and Services Tax or GST in Singapore is known in other countries as the Value-Added Tax (VAT). It was introduced in 1994 and is still in effect.
This broad-based consumption tax is imposed on a range of goods and services sold in Singapore. Apart from that, it is also levied on the import and export of goods.
The GST system operates much the same as other countries with VAT and GST. However, the Singapore GST Tax may have definitions and guidelines which could differ on what is GST taxable and what is not.
This article touches on all the general aspects of the GST relevant to business entities but not to consumers.
Who pays GST in Singapore?
Only GST registered businesses can charge and collect GST. Consumers or buyers pay GST to sellers when they purchase goods or services which are subject to the tax.
Sellers then pay the GST to the Inland Revenue Authority of Singapore (IRAS). If the GST is for import of goods, it is paid by the buyer or importer of the goods to the Singapore Customs.
The requirement for GST registration is dependent on the value of taxable turnover of a business. This value is based on the value of goods and services supplied.
Output Tax and Input Tax
A GST-registered business is expected to charge output tax and pay for input tax. Output tax is billed into or added to the price of GST-taxable goods and services sold. Input tax is paid to a GST-registered company for GST-taxable goods and services.
What must be carried out for output tax and input tax:
- Submit GST return to IRAS one month after the end of each prescribed accounting period (usually done on a quarterly basis).
- Report both output tax and input tax in GST return.
- The difference between output tax and input tax is the net GST payable to IRAS, or refunded by IRAS.
Taxable and Non-Taxable Goods and Services
Not all goods and services are subject to GST. The rules also vary according to different business sectors.
- List of categories and types of taxable and non-taxable items
- Guidelines for specific business sector
Singapore GST Rate
The rate for all GST chargeable goods and services is 7 percent. Exports and international services are charged at zero rate of GST, while certain goods and services are exempt from being charged GST or they are classified as ‘out-of-scope’ supplies.
What is zero rated GST in Singapore?
A GST-registered company in Singapore should charge zero rates in two instances: when it provides international services and when exporting goods.
A service is considered an ‘international service’ when it falls within provisions under Section 21(3) of the GST Act. The client’s belonging status – whether the client is a local or an overseas entity – must be clarified before the service can be zero-rated.
The supply of goods are considered for export if:
- the goods supplied are certain to be exported or have been exported; and
- you have the required documents to support zero-rating.
The required supporting documents are for transaction and transport documents related to the export. There are a few scenarios of export goods – direct exports, indirect exports, Hand-Carried Export Scheme, supplies to aircrafts and supplies to ships.
What are exempt supplies under GST?
The following are considered exempt supplies, which means GST need not be charged on them.
- Financial services
- Digital payment tokens
- Sale and lease of residential properties
- Import and local supply of investment precious metals (IPM)
What constitutes financial services?
A complete list of financial services exempt from GST is available in the Fourth Schedule in the GST Act. Here are some examples of financial services offered by financial institutions:
- Provision of loans
- Exchange of currency
- Issue or sale of shares or bonds
- Provision of life policy by an insurance company
- Provision of derivative that does not lead to any delivery of goods or services
What about financial services offered by non-financial institutions?
Deposit of money in a bank
This section is applicable to individuals or entities which place a cash deposit in a bank. This deposit is deemed as a loan from the depositor to the bank wherein the bank pays the depositor an interest income. The depositor should report this interest income as an exempt supply in Box 3 of the GST Return (Total Value of Exempt Supplies).
Foreign currency transaction
If goods or services are invoiced in a foreign currency, gains or losses may arise from the currency exchange to Singapore dollars. In this instance, you should report the absolute value of net realised exchange gain or loss for each prescribed accounting period as your exempt supply in Box 3 of your GST return.
Fees on financial transactions
Services where fees are charged on advisory, arrangement, broking or underwriting of financial activities are not exempt from GST. This is especially so when any of these services are provided to local clients (Singaporean or based in Singapore).
These services can be zero-rated only if they are offered to overseas clients.
What does GST Out-of-Scope mean?
It refers to supplies which fall outside the scope of the GST Act. There is no GST charge on this category.
Out-of-scope supplies include the following:
- Third country sales – sales of goods that are delivered from a place outside Singapore to another place outside Singapore
- Sales made within Free Trade Zones (FTZ) – When overseas goods are supplied within the FTZ, the supply is not subject to GST and need not be reported in the GST return.
- Sales made within Zero GST (ZG) warehouse – the supply of overseas goods that are stored in the ZG warehouse
- Private transactions – non-business activities which no payment or expectation of payment from their recipients
Singapore GST Registration
A company need not register for GST and may apply for exemption from registration if it meets both of these conditions:
- the proportion of its zero-rated supplies over total taxable supplies exceeds 90%
- in a net refundable position had the company been registered for GST
Even if a company is not liable for GST registration, it may still do so voluntarily after careful consideration. There are two factors to take into consideration when it comes to registering a business for GST and when it should be done.
A company or business person should register if his total taxable turnover exceeds S$1 million and fulfills either of the following views:
1. Retrospective View
Period of evaluation: taxable turnover at the end of any calendar year on or after 1 Jan 2019
What needs to be done:
- Compute taxable turnover on a calendar year basis for the purpose of determining registration liability
- Monitor at the end of every calendar year (i.e. 31 Dec)
When to register: within 30 days from the date of liability to register (ie. 30 Jan).
2. Prospective View
Period of evaluation: the next 12 months (wherein total taxable turnover is expected to be more than S$1 million)
What needs to be done:
- Forecast expected total taxable turnover based on market assessment, business plans or sales targets
- Register for GST when there is certainty that your taxable turnover will exceed S$1 million
- Submit supporting documents to support forecast value of S$1 million
Supporting documents for forecasting are:
- Signed contracts or agreements
- Accepted quotations or confirmed purchase orders from customers
- Invoices to customers with fixed monthly fee charged
- Income statements showing that past 12-month period was already close to S$1 million and that annual turnover is on an increasing trend
When to register: on the 31st day from the date of forecast.
3. Reverse Charge and Overseas Vendor Registration
From 1 Jan 2020, the reverse charge regime stipulates that a business must register for GST if the business procures services from overseas suppliers for total value imported services exceeding S$1 million and would not be entitled to full input after GST-registered.
The overseas vendor registration regime states that a foreign business must register for GST if it has an annual global turnover exceeding S$1 million and make Business-to-Consumer (“B2C”) supplies of digital services to customers in Singapore exceeding S$100,000.
When to register: within 30 days from the date of liability to register (ie. 30 Jan).
Consequences for late GST registration
- Your date of registration will be backdated to the date that you were liable to be registered.
- You will have to account for and pay GST on your past sales starting from the effective date of registration, even if you did not collect any GST from your customers.
- You may face a fine of up to $10,000 and a penalty equal to 10% of the GST due. Prosecution action may apply.
The late notification fine and penalties may be waived if an application for GST registration is submitted and you voluntarily disclose that you are late in registration.
How to calculate GST in Singapore
The Inland Revenue Authority of Singapore (IRAS) provides a calculator to help businesses determine their GST liabilities:
How to check if a company is GST registered
This can be done online easily. Go to the GST Registered Business Search platform on myTax Portal. You will need either the business entity’s full name or Tax Reference number (i.e. UEN / NRIC / GST registration number).
How to claim GST refund in Singapore
Claims or requests for a refund can be made when there is overpayment or wrong payment of both duties or GST. The claimant should first write to the Singapore Customs for their assessment of this claim.
There is a timeline for GST refund claims:
- Within 5 years from the date of payment of duty
- Within 5 years from the date of payment of GST
Aside from overpayment and wrong payment, there are other common reasons for refund:
- Double payment
- Double declaration
- Shipment cancelled
- Shipment for re-export/tranship
- Shipment under personal effects
- Shipment under temporary import
- Importer under the Major Exporter Scheme
- Wrong declaration of value
- Wrong importer’s name/Unique Entity Number
- Wrong declaration of Harmonized System code
- Exemption/GST relief granted
How to apply for GST refund
A company or its appointed declaring agent can apply the refund online. They will then be notified of the outcome through the Refund Module in TradeNet.
The three possible outcomes are:
The claimant or taxable importer may be asked to claim from IRAS instead.
Successful refunds will be credited directly into the Inter-Bank GIRO (IBG) accounts of the claimant who have IBG accounts with Singapore Customs.
- Pending supporting documents
Singapore Customs may need more supporting documents to process or review a claim. A notification will be sent to submit the following:
- Refund permit
- Replacement permit (if applicable)
- Packing list
- Commercial invoice
- GST/Duty computation
- Bill of Lading/Airway Bill
- Arrival notice/freight notification or delivery order
- Bank slip and bank statement (for payment made at the bank)
- Any other documents required by Singapore Customs to verify the claim
However, refund claims should be made from IRAS instead for these scenarios:
- If GST was deducted via IBG from the importer’s (permit conditions GF and TX) bank account registered with Singapore Customs
- If GST was paid by the importer at the bank
The status of all refund applications can be checked on TradeNet.
All supplies of goods and services in Singapore are imposed a 7 percent GST rate unless they are categorised as zero-rated, exempt or out-of-scope.
Businesses with a minimum total taxable turnover exceeding S$1 million in a financial year (up to 31 December) are required to register for the GST. There are 3 ‘views’ which qualify businesses for compulsory registration, as elaborated in the article.
The tracking and billing of GST in daily business activities can be a time-consuming affair. That is why many businesses outsource to corporate service providers such as Intime Accounting.
At Intime Accounting, we have a dedicated team to offer corporate tax services as well as bookkeeping and accounting services. By outsourcing accounting and corporate tax needs to us, your company can focus on your core business activities.
Our core business activities are bookkeeping and accounting as well as corporate tax. As such, we are able to focus all our efforts on these areas to ensure your company operates within IRAS and Singapore Customs regulations in a timely and smooth manner.
Contact us today to get an affordable quotation for our services based on your specific needs.
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