If you run a business in Singapore, you must familiarise yourself with the Goods and Services Tax (GST).
It may sound like a fairly complicated concept for those who have never heard about GST but the truth is that learning about GST will significantly affect how your business is run.
Interested in learning more about this key aspect of running a business in Singapore? We’ve got you covered here at SJH Advisory, with professional consultants and experts for all your company incorporation needs.
This article will focus on all the essential details that affect a GST registered company in Singapore, including the definition, registration requirements, pros and cons, and more.
What is GST?
GST, also known as Goods and Services Tax, is a consumption tax levied on all products and services within the country. This tax also affects the importation of goods into the country.
While Singapore authorities refer to this levy as GST, you may find it labelled as Value Added Tax (VAT) in other jurisdictions.
The Goods and Services Tax is charged at 7% in Singapore.
You’ll be thrilled to know that the value of the GST is usually charged on products and services enjoyed by customers. As a result, the cost does not affect your company. Businesses only serve as collecting agents for the government.
The Goods and Services Tax of Singapore was implemented in 1994. The current model was derived from the VAT system adopted in the UK and the GST system of New Zealand.
In Singapore, the Inland Revenue Authority is responsible for administering, enforcing, assessing, and collecting GST on goods and services.
The Goods and Services Tax is levied to reduce individual and corporate income tax rates and create a steady source of income for the government.
How does GST Affect a Singapore Company?
If you’re a GST registered company in Singapore, you’ll need to include the price of this levy on your goods and services. After this, you’ll be required to collect all the taxes paid and remit them to the government.
For instance, if you’ve rendered a service worth $500, the GST on this service will be $35. This means that the total payment that’s due by the customer is $535.
The customers will be required to pay the total sum of $535 to receive the service from your company.
All the GST charged on customer purchases will be remitted to the Singapore Tax Authority through a periodically filing.
It’s essential to note that not all companies that are registered in Singapore are expected to charge GST automatically. To become a GST registered company in Singapore, you must meet certain conditions and apply to IRAS.
After completing this process and with approval granted by IRAS, you can begin collecting and charging GST.
What are GST Registration Requirements?
As mentioned earlier, not all businesses are required by the government to be a GST registered company in Singapore.
GST is a unique type of levy; businesses are continuously required to reassess their need to register for GST.
here are two types of GST registration for corporations: voluntary and compulsory.
Compulsory Registration
Any company is required to register for GST under the following conditions;
- Your business has had an annual taxable turnover of more than S$1 million. This is also known as the retrospective view.
- Your business is projected to make more than S$1 million in taxable sales in the next 12 months, including all contracts you have signed that have the potential to generate revenue. This is referred to as the prospective view.
When your company’s taxable revenue exceeds S$1 million, you must register for GST with the IRAS within 30 days. If you fail to do so, you’ll be penalized.
Voluntary Registration
Businesses that do not qualify automatically for the compulsory GST registration may voluntarily register for it.
However, the registration will depend on the nature of their business operations. Businesses in this category must either be involved in sales or plan to engage in sales of products and services in Singapore.
If you voluntarily register for GST, your business will need to maintain the status as a GST registered company in Singapore for the next two years.
During this period, you’ll have to comply with GST regulations by filing your GST returns periodically and maintaining your financial records for the past five years.
Businesses must keep their financial records intact even after the business has ceased or been deregistered from GST. Your business must also comply with any other tax regulations imposed by the Singapore authorities.
Which Companies are Exempt from GST Registration?
Some companies may be exempted from adding this levy to the amount they charge their customers.
You can apply for an exemption if your company deals solely in zero-rated goods. This exemption should be granted regardless of whether your taxable turnover exceeds S$1 million or not.
A GST exemption is good news for certain companies because it allows them to run their business without worrying about GST registration and the mandatory periodic tax return filing.
The IRAS will agree to exempt your business from being a GST registered company in Singapore if it correctly identifies that 90% of your trade supplies are zero-rated or if your input tax exceeds your output tax.
What Are the Benefits of GST Registration?
Businesses will enjoy the following benefits from applying to be a GST registered company in Singapore:
- Lower operating costs
- Better business legitimacy
- Encourages savings
- Allows businesses to recover expenses and reduce purchase costs
How Can We Help?
There’s no doubt that the GST system is designed to regulate buying and selling activities in the country while also generating revenue for the government.
However, many businesses struggle with the administrative demands a being a GST registered company in Singapore and the periodic tax return filing that is required.
That’s where we come in.
SJH Advisory is a business consultancy firm that can help you tackle administrative struggles. We are experts in offering professional services to different businesses and have exactly what it takes to assist you with GST registration.
Our experts will also help you with your periodic tax filing and ensure you stay on the right side of the law as a GST registered company in Singapore.
Handling a GST Registered Company in Singapore - Frequently Asked Questions
The IRAS has laid down several guidelines to guide GST handling in each industry. Every business needs to study them closely, especially if they are a GST registered company in Singapore.
All goods and services offered from a GST registered company in Singapore incurs GST, except those classified as zero-rated supplies.
