Ultimate guide on Singapore Goods and Services Tax (GST) for businesses
Taxes are a legal compulsion to every business entity in Singapore or globally. Every country has its tax system that guides the purchase and sale of goods and services.
The Inland Revenue Authority of Singapore (IRAS) is the main tax body of the GST Act Singapore administers, analyzes, collects, reports, and enforces payment of GST returns.
In Singapore, the Goods and Services Tax act was enforced from 1st April 1994 as the official Singapore VAT. Goods and Services Tax was introduced with the aim to standardize tax rates across all the varieties of goods and services, with a few exceptions.
Instead of overseeing multiple tax rates, the government introduced one tax regime eligible for all commodities. Also, the enforcement of GST in Singapore enabled lower income tax rates for both individuals and corporates.
Goods and Services Tax (GST) is a type of consumption value-added tax (VAT) levied on the sale of goods and services by a business. GST is a form of indirect or compulsory tax that is supposed to be added over and above the value of goods and services.
GST Act Singapore, 1993 explicitly mentions adding GST on all domestic and international sales irrespective of the nature of goods or services. Apart from this, any imported goods in Singapore are liable to pay GST apart from customs and other charges.
The current Singapore VAT rate/GST rate is 7%. Despite increasing its rate from 7% to 9%, Singapore's GST rate is currently the lowest of any country in the world.
But unlike any other country, Singapore's companies are liable to pay GST only when their annual taxable turnover exceeds SGD 1 million in the calendar year or is bound to exceed SGD 1 million by the end of the accounting year.
If an entity is legally registered in Singapore, they are liable to collect Singapore VAT from its customers at the point of sale.
The invoice generated mentions the tax amount which is chargeable to the customer. After receiving the amount, the company's finance team either pays the GST return monthly or quarterly.
If Company A purchases machinery from Company B at SGD 1000, the invoices total SGD 1070, including the Singapore VAT tax rate of 7%.
After receiving the invoice payment, the company can file for a GST return to the Inland Revenue Authority of Singapore (IRAS). The tax payable can be paid through an online portal, which immediately prints out a receipt after completing the GST return.
Considering the scale of business operations, not every business entity is required to pay GST returns with a taxable turnover of less than SGD 1 million. You can voluntarily register yourself with GST number Singapore if you plan to expand your business operations.
Not all goods and services are taxable. The Singapore VAT tax rate differs from commodity to commodity.
Listed below is the scope of tax liability for different types of businesses, professional services, and commodities.
• It includes the sale of goods and services regularly, i.e., gross sales.
• Also covers international trade like imports of goods and services.
• The items covered under this slab are subjected to a Singapore VAT rate — of 7%.
• For example- the sale of office stationery from wholesaler A.
• The chargeable tax rate for zero-rated supplies is 0%.
• It covers exports of goods and rendering international services to foreign clients.
• Additional items include supply and lease of selected aircraft and machinery or tools.
• For example- An MNC delivers its test product to different countries’ headquarters from their home country.
• The Fourth Schedule of GST Act Singapore lists certain non-taxable goods and services.
• This means the tax levied on such goods and services equals 0%.
• This consists of the sale and purchase of unfurnished residential property, import and local supply of valuable metals, and provision for financial services like the issue of investment options.
• For example- a securities company issuing shares to a non-resident of Singapore.
• Lastly, the out-of-scope supplies too have 0% tax liability upon them.
• It includes entrepot trade, i.e., one country importing goods from another and later exporting them to a third country.
• Private transactions taken place overseas and not in Singapore.
GST Assisted Self-help Kit is a supportive program launched by the Inland Revenue Authority of Singapore (IRAS) to help businesses self-assess their final GST filing.
This program allows companies to identify and uncover early errors and reverse them before the final submission of documents.
Companies possessing a VAT number Singapore are all advised to undertake the self-assessment, not only to find flawed numbers and allow themselves to qualify for concessions provided under the Voluntary Disclosure Program (VDP).
The GST ASK mainly consists of three key elements essential for GST registered businesses (GRBs) to determine any flaws in the filing.
• The first step in the self-testing process is understanding the purpose of GST filing, the internal procedures that should be followed in your company, and general guidelines and rules.
• The internal processes in your company cover four aspects — people, record-keeping, systems, and internal controls.
• The guidelines are specific to newly registered business entities liable for GST returns.
• The second step in the process is completing the pre-filing checklist.
• The checklist includes a series of questionnaires that helps companies in estimating the accuracy of the document submissions.
• This step addresses the requirements for first-time companies registered under the GST Act Singapore or companies who had a change in the arrangement of personnel handling the GST filing.
• ASK Annual Review helps companies perform regular reviews of past GST returns for early detection of fallacies and errors.
• This step guides companies with previous experience in GST filing, which allows them to recheck past GST submissions made in the preceding financial years.
• To elaborate, this stage ensures the transactions were correctly entered without duplication and omission. If any discrepancies are found, the company must immediately report to IRAS and take corrective action as guided by IRAS.
The GST Assisted Self-Help Kit enables companies to understand the GST requirements for filing returns and guides accounting professionals on recordkeeping and inclusive tax laws.
It ensures that all the accounting practices are the same across all the financial years and that taxation laws, grants, and deductions are in accordance with the goods and services tax act.
Additionally, it helps review the accuracy of the GST documents — provided the companies report any errors or omissions to the IRAS within a year to be imposed with no penalty. The IRAS has created a Voluntary Disclosure Program (VDP) through which companies can easily report errors.
If the company purposely and intentionally does modifications in the GST filing in order to evade tax payment, the IRAS recognizes this act as tax fraud. Therefore, the penalty will be as high as 200%, with a potential cash penalty of SGD 50,000 and seven years of imprisonment.
Moreover, if a company finds an error in the GST filing during the ASK review, reports it to the IRAS, and takes measures to rectify it — the IRAS grants them administrative concessions for their responsible act.
Along with other benefits, companies get to unlock GST schemes such as:
• Import GST deferment scheme
• Approved Marine Customer Scheme (AMCS)
• Approved Contract Manufacturer and Trader (ACMT) Scheme
• Approved Refiner and Consolidator Scheme (ARCS)
• Major Exporter Scheme (MES)
• Approved Third-Party Logistics (3PL) Company Scheme
• Approved Import GST Suspension Scheme (AISS)
Companies having GST registration number Singapore are required to file their GST returns before or on the statutory date as declared by the tax body, i.e., IRAS.
If the company fails to do so, a grace period of one month is allowed from the statutory date.
After that, if the company fails to make the GST payment, a 5% penalty will be imposed because of non-payment of dues.
But as per the Goods and Services Tax Act, there are two conditions for a company to be legally liable to pay GST returns.
If a company’s annual taxable turnover exceeds SGD 1 million, or when the taxable turnover in one quarter plus the last three quarters exceeds SGD 1 million, the company is entitled to file for Goods and Services Tax.
Suppose you have reasonable grounds to believe that your annual taxable turnover will exceed SGD 1 million in 12 months. In that case, you can register for a GST return 30 days before your estimated date.
To support your forecast of SGD 1 million, the company must have the following documents:
• Signed contracts or agreements by the company
• Accepted quotations or confirmed purchase orders from merchants
• Invoices to vendors with fixed monthly chargeable fees
• Income statements show that the past 12-month taxable turnover was already close to SGD 1 million, and the current growth trend of annual turnover is increasing.
After your annual taxable turnover crosses SGD 1 million, the company is required to submit a GST application to the IRAS within 30 days and obtain the GST number Singapore.
Any delay or failure will result in penalties for the business entity, the reason being the avoidance of registration and thereby unwillingness to pay Singapore VAT.
Exceptions of Compulsory registration
• The annual taxable turnover is derived entirely or mainly from zero-rated supplies, and you apply for exemption from the GST registration.
• You are entitled to GST registration under the retrospective view but not under the prospective view, and the following conditions should exist for your forecast: The company is confident the annual taxable turnover for the next 12 months will not exceed SGD 1 million; the taxable turnover is projected to be lower due to the occurrence of specific circumstances (e.g., large-scale downsizing of business); you have supporting documentation to substantiate your projection
Businesses can voluntarily register for GST number Singapore, even if they are not legally bound to pay taxes on their annual turnover.
Be aware that your business is not liable to receive any input tax credit until your business is a GST-registered business.
Additionally, once you have voluntarily registered your business, you must stay registered for at least two years.
Further, comply with the GST regulations by filing the GST return on time quarterly and maintaining all the business records for at least five years, even after your business has shut down its operations and deregistered business from the GST act Singapore.
The GST registration depends on the annual taxable turnover of the business, type of business as a sole proprietorship, partnerships, joint ventures, and the registration type selected (Compulsory or Voluntary).
Before registering a GST number Singapore, it’s critical to keep all the records and documents handy to allow smooth registration of the GST number.
We recommend that you prepare a GST registration checklist to ensure you don’t miss out on any aspect of the process.
Highlighted below are the steps to be followed by companies who are willing to file for GST registration under the GST Act Singapore.
Firstly, the business must analyze if they opt for voluntary registration or are legally liable to pay GST under the compulsory registration.
If it’s compulsory registration, then is the annual taxable turnover according to the prospective or retrospective view.
The e-Learning courses mentioned in the kit provide businesses with basic knowledge of the GST guidelines and regime, which will enable companies to understand the treatment of various commodities and pathways in certain situations.
The online course also explains the GST filing process and provides compliance tips and a brief overview of taxpayers' tax obligations.
For companies with voluntary registration, the company director, sole-proprietor, partner, trustee, and preparer of GST returns must understand and finish the e-Learning course (Overview of GST) and later undertake a quiz they are required to pass.
But this quiz is not required if:
• The company director, sole-proprietor, partner, or trustee of the business has experience handling other GST-registered businesses.
• The employee concerned with your GST filing is an Accredited Tax Advisers (ATA) or Accredited Tax Practitioners (ATP)
• The business has applied to be registered under the Overseas Vendor Simplified Pay-only Registration Regime.
The third step is submitting your application online or submitting a hard copy to the IRAS.
For your online application, follow the instructions below:
• The business or any employee must be authorized by Corppass (for any of IRAS’ online services like e-Filing of Corporate Tax, e-Submission of Employment Income, and more) to receive permission into the GST registration digital service on IRAS' MyTax Portal.
• If no one from your company, like your employees or your tax agent, has a Corppass account, you must first get your business registered to proceed ahead in the GST registration process.
• Next, you will be required to attach supporting documents like ACRA registration number, GIRO application form, GST F3 form for Partnership, Limited Partnership and Joint Ventures, and so on.
• In case of voluntary registration, you must fill out the GIRO form for GST payment and tax credit.
The Paper application services were discontinued in 2018, and hence, every business willing to register for a GST registration number Singapore needs to apply online.
Once the company submits the application form and attachments, the IRAS scrutinizes the application form.
One of the primary forms in your application process is the GIRO (General Interbank Recurring Order) form, without which your application will not be processed further.
The GIRO form is assessed and analyzed at the customer’s bank, which requires a timeline of two to four weeks for processing.
• The “compulsory registration” is treated as a high priority, and hence their application is processed within a week.
• The “voluntary registration” can take up to 2 weeks for processing.
Once all the required registration documents are scrutinized and verified, the bank directly notifies the authorized person in the company about their successful registration.
The IRAS sends a letter to the company registered address enclosing the GST registration number Singapore and the effective date of the registration number.
After the registration date, you can start printing your GST number on your invoices and receipts.
Registering your company under the GST Act yields many benefits to the business and the government.
Over time, Singapore has become a hub of business and trade in the Asian market, with numerous companies and startups sprouting up. It is critical for your business’s survival and expansion to be known among the masses in such an intense game.
Having a GST registration number Singapore allows your target audience and prospective customers to identify and locate your business operations in the country.
Additionally, a GST certificate is a legal document that verifies your business activities and helps establish customers’ faith in your products and services.
Once the company is a GST registered business in Singapore, the customer base eventually starts forming, your sales start rising, and profits tend to increase.
With incoming profits, your business generates an increased cash inflow to finance business operations and fetch growth opportunities.
From a government perspective, when businesses pay the Singapore VAT rate, the amount deposited into the government funds increases the cash inflow with them, improving the liquidity in the economy.
With better cash availability, the government puts them to judicious use for citizen welfare programs and improvement in existing infrastructure.
The tax structure in Singapore is highly regarded as one of the most flexible and consumer-centric.
Because the companies in Singapore are responsible for paying corporate income tax regularly, the government gives them benefits by keeping the personal income tax rate as favorable as possible.
The government is able to identify such companies by their GST number Singapore, their past GST filing history, and performance reports.
Intending to inculcate the habits of savings and investments among people, the government has made all schemes of savings and investments GST-free.
The main motive behind this is to allow people to generate enough passive and investment income, which ultimately allows free float of cash into the economy.
As a result, the government has levied an economic tax rate on consumable items only. Because the people and companies continue to pay taxes on almost every product, it’s pretty equitable if the government has made investment schemes tax-exempt.
Conducting business activities in Singapore is favorable for the companies in the long run, all thanks to the fair-minded and coherent tax regime.
Having a GST registration number in Singapore does all the wonders for companies. GST-registered companies cut down their tax costs by adding them to the price of the final product, which the customers then pay.
The government has special schemes for small and medium enterprises, allowing them to operate at low administrative costs and access many incentives.
A company registered under GST Act Singapore must file GST returns to the IRAS. This especially applies to the company with Compulsory registration.
Here are some key takeaways about filing GST returns:
• GST returns are supposed to be filed according to the GRBs accounting period, i.e., Monthly or Quarterly.
• The GST return has to be filed online by accessing the government’s official tax portal.
• The GST return form must disclose all information regarding the company’s sales, purchases, imports, and exports, along with enough supporting documents. Additionally, the company has to report all the GST collected through sales of goods and services.
• The due date of the GST filing is one month from the date of the last day of the accounting period.
• Even if a business has a negligible GST return, they still have to file for the return.
The companies cannot just file every GST collection made. Before the final submission, companies need to determine the net GST.
Net GST is calculated with the help of two types of taxes:
• Input tax, wherein the companies pay GST to other companies who supply them with goods and services. E.g.:- supplier of raw materials.
• Output tax, wherein the companies levy GST on the businesses/customers who purchase their products in output tax. E.g.:- the sale of consumable items
To compute Net GST, companies deduct the difference between input and output taxes.
This essentially means if the output tax exceeds the input tax, the company is liable to pay GST return to the IRAS whereas, if the company’s input tax outnumbered its output tax, the IRAS issues the refund of the total amount.
For example - If your output tax is SGD 5000 and input tax is SGD 3500, the difference comes down to SGD 1500, which is supposed to be paid by the company.
On the other hand, if your input tax is SGD 2500 and output tax is SGD 1000, you are liable to receive a refund of SGD 1500 from the IRAS.
1. In case the business fails to pay the Singapore VAT from one month of the due date, the IRAS sends a notice for nonpayment of dues, and it attracts a penalty of 5% of the Net GST amount.
2. If the company still fails to pay the amount after 60 days, the additional penalty on the existing penalty is 2%.
3. On the complete failure of filing GST returns, the IRAS sends a “Notice of Assessment” to the company with an estimated tax yet to be paid. The penalty amount on the estimated tax is set at 5%. For non-clearance of dues, the IRAS charges SGD 200 every month for non-filing of the return. The maximum penalty is SGD 10,000.
The Goods and Services Tax Act have several provisions for businesses in GST schemes. These schemes are intended to increase the production capacity of the manufacturing units, assist newly formed SMEs, and enable companies to market their products without any barriers.
Following are the GST schemes formed by the Singapore government and IRAS to encourage the activities of production and consumption.
To avoid multiple slabs of GST while production and sales, the GST is chargeable on the gross margin of your goods only.
This scheme allows exporters to increase their cash flow by deferring GST payments on imported goods, mainly for re-exporting.
If you don’t want to pay GST on your exported goods, you can zero-rate (goods with 0% GST tax rate) by hand-carrying them via Changi international airport.
Companies can transform their warehouses into Zero-GST warehouses to minimize red tape and cross the GST process.
You can license your warehouse to store dutiable goods. In licensed warehouses, duty and GST are disabled until the goods are sold in Singapore.
This scheme is a type of relaxation specifically for small businesses whose annual sales did not exceed SGD 1 million.
The scheme allows traders and second-hand dealers to charge 50% GST on a second-hand / used vehicle.