To adapt to Singapore’s changing economy and cater to the increasing demands of its population, the government has announced Singapore GST hike 2023. As a business owner or executive, it’s crucial to stay informed and prepared for this upcoming change. The GST hike will significantly impact your organization’s financial strategies and operations. In this article, we will provide key considerations and actionable advice to successfully navigate the Singapore GST hike 2023.
What Is GST in Singapore?
Goods and Services Tax (GST) is a consumption-based tax system implemented globally, including in Singapore. In Singapore, GST is a broad-based tax that applies to both the import of goods, collected by Singapore Customs, and almost all supplies of goods and services within the country.
The calculation of GST is based on either the customs value of the goods, including all duties, or the value of the last selling price plus all duties, in cases where there have been multiple sales. In other countries, GST is referred to as VAT or value-added tax.
How Much Is the Singapore GST Hike 2023?
In 2022, the GST rate in Singapore stood at 7%. However, in 2023, there was a planned hike to raise the GST rate to 8%. The increase from 7% to 8% marked the first step in implementing the new tax rate.
Following the initial increase, the government has outlined a further adjustment in the GST rate. By 2024, the plan is to raise the GST rate to 9%. This gradual approach allows businesses and individuals to adapt to the changes and make necessary adjustments to their financial strategies and budgets.
When Will The Singapore GST Hike 2023 Be Implemented?
The first phase of the Singapore GST hike 2023 took effect from 1 January 2023. This means that starting from this date, businesses had to adjust their GST calculations and charge a higher rate on their goods and services. During this phase, the GST rate has increased from 7% to 8%.
It’s important to note that for invoices issued before 1 January 2023, the GST rate should still be 7%. However, any invoices issued on or after 1 January 2023 should reflect the new rate of 8% in their GST calculations.
The second phase of the GST hike will come into effect from 1 January 2024. From this date onwards, the GST rate will be further increased to 9%. Businesses will need to update their systems and processes to ensure that the correct GST rate is applied to their transactions.
To summarize the GST rates during the different periods:
- Invoices issued before 1 January 2023: 7% GST should be applied.
- Invoices issued from 1 January to 31 December 2023: GST rate should be adjusted to 8%.
- Invoices issued from 1 January 2024 onwards: GST rate should be set at 9%.
Rationale Behind Singapore GST Hike 2023
The decision behind Singapore GST hike 2023 is driven by the need to address critical challenges arising from the country’s aging population and rising healthcare expenditure. By generating additional revenue through the Singapore GST hike 2023, the government aims to support healthcare expenditure and provide necessary care for its senior citizens.
When the full GST hike is in place in 2024, it is estimated to bring in approximately 0.7% of the country’s GDP annually. This translates to around $3.5 billion in revenue each year. The increased revenue will contribute significantly to financing various government initiatives aimed at enhancing healthcare expenditure and providing care for senior citizens.
Impact of Singapore GST Hike 2023 on GST-Registered Businesses
The Singapore GST hike 2023 has implications for GST-registered businesses. As a business owner, it is important to be aware of the necessary steps to adapt to the changes and ensure compliance with the updated tax regulations. Here are some key actions that business owners must take:
- Update accounting and invoicing systems.
- Update cash register and receipt systems.
- Comply with price display requirements: Learn about the specifications for pricing display listed in the IRAS e-Tax Guide.
- Train staff on the new transitional rules and correct GST rate application.
- Review contracts/agreements. This will help maintain clarity and avoid any discrepancies in your contractual obligations.
- Inform customers of the GST increase: Transparent communication about the revised GST rate helps manage customer expectations.
- Consider applying for the Major Exporter Scheme: Read about the Major Exporter Scheme (MES) and to determine if your business is eligible.
Is It Advisable For Non-GST Registered Businesses To Consider Voluntary GST Registration?
Non-GST registered businesses may incur greater costs when making purchases from GST-registered suppliers with the Singapore GST hike 2023. To offset the impact of increased costs resulting from the hike, non-GST registered businesses have the option to voluntarily register for GST. This allows them to recover the GST incurred on their expenses.
However, before making a decision, it is crucial for businesses to carefully assess the potential benefits and weigh them against the additional compliance costs associated with GST registration. Registering for GST also comes with certain administrative obligations, including filing regular GST returns, maintaining accurate records, and ensuring compliance with GST regulations.
Consequences of Non-Compliance with the Singapore GST Hike 2023
Non-compliance with Singapore GST hike 2023 entails GST evasion that takes place when individuals deliberately furnish false, inaccurate, or incomplete information to the tax authority in Singapore. In the event of being convicted of GST evasion, the following consequences will be imposed:
- A penalty equivalent to three times the amount of tax evaded or the amount that would have been evaded will be required to be paid.
- There is a possibility of being subjected to a fine of up to $10,000, imprisonment for a maximum term of 7 years, or both.
Non-compliance with the higher GST rate results in more severe penalties. Penalties are typically based on the amount of tax underpaid or overclaimed. For instance, a 5% late payment penalty is imposed for tax that is under-declared or over-claimed.
How We Can Help - SJH Advisory's Taxation Services
At SJH Advisory, we understand the challenges that executives and business owners face in ensuring compliance and maximizing financial efficiency. That’s why we offer a comprehensive taxation service designed to support your business throughout this transition and beyond.
Our team of experienced tax professionals is well-versed in Singapore’s tax regulations and the implications of the Singapore GST hike 2023. We can assist you in understanding the impact of the GST hike on your specific business operations, identifying potential areas of risk or opportunity, and developing tailored strategies to mitigate costs and optimize your tax position.
Let us help you navigate the evolving tax landscape and ensure your business remains resilient and financially optimized. Schedule a FREE consultation with our tax experts today.
Singapore GST Hike 2023 - Frequently Asked Questions
The Singapore GST hike 2023 refers to the planned increase in the Goods and Services Tax (GST) rate. It was set to rise from the rate of 7% to 8% in 2023, and then further increase to 9% in 2024.
The GST hike took effect from 1 January 2023 for the increase to 8%. The subsequent increase to 9% will come into effect from 1 January 2024.
Businesses can take several steps to prepare for the GST hike, such as reviewing contracts and agreements to determine the applicable GST rates, updating accounting and invoicing systems, training staff on the transitional rules, and considering the potential benefits of voluntary GST registration. Seeking advice from professional consulting firms like SJH Advisory can also greatly assist in the preparation process.