This month, we look at the Singapore system for Goods and Services Tax (“GST”) which was introduced in Singapore in 1994 and has a current rate of 7%.
In Singapore, GST is levied on the supply of goods and services in Singapore, and on the importation of goods into Singapore. In the case of a supply of goods and services, the applicable GST is collected by the supplier / seller and remitted to the Inland Revenue Authority of Singapore (“IRAS”). Where goods are imported into Singapore, the GST is collected by Singapore Customs at the point of importation.
GST can only be levied and collected if your business is registered for GST. GST registration is mandatory if your business has a taxable turnover of SGD1M and above for the next 12 months.
Taxable turnover refers to the supply of goods or services which are subject to GST. If you can show that the taxable turnover over the next 12 months for your business will be less than SGD1M, then you will not need to register for GST. If the turnover for the next 12 months is expected to exceed SGD1M, then you have 30 days to register for GST from the end of the month in which the SGD1M threshold has been exceeded.
Failure to register for GST when your business meets the threshold turnover amount may result in a fine and penalty. Where you are late with the registration, you will also have the registration commencement date backdated to the point in time that the business did exceed the SGD1M threshold. If this is the case, you will then be assessed GST during the reporting period commencing from the backdated commencement date.
If you do not exceed the taxable income threshold, you can still register voluntarily for GST if you can show that 90% of your business supplies are zero-rated. A zero-rated supply is an export of goods from Singapore or the provision of international services.
In this situation, your business will be allowed to register for GST and then claim the GST incurred on expenses in relation to the exported goods – in this situation you are typically expected to be paid a refund from IRAS as your GST collected on sales will be less than any GST paid on paid on purchases.
In Singapore, GST is customarily reported and remitted to IRAS on an invoice basis. This means that GST is payable even though the GST may not have been paid by the customer . Notwithstanding the above, if your business is registered for GST voluntarily (i.e., taxable turnover is less than SGD1M), you can apply the Cash Accounting Scheme – this Scheme allows you to report GST on a cash basis.
GST reporting is done electronically on a quarterly on monthly period, with the GST quarter determined by the financial year end for your business. The GST report is due for lodgement with IRAS within one month of the end of the reporting period.
In the return, you report all the GST collected, and GST spent in the business. The net GST is what is payable or due to you as a refund. The amount owed is taken via direct debit by IRAS from your business bank account on the 15th day after the due date for the lodgement of the GST report. Refunds are processed by IRAS and paid directly into your nominate business bank account with 7 days after the lodgement of the GST report.