Goods and Services Tax (GST)
GST or Goods and Services Tax is also known as an indirect tax because it is not a tax imposed directly on revenue or income but a tax imposed on consumption. Some countries called it a Value-Added Tax or VAT because it is only imposed on the incremental value of your purchases or expenses (i.e. you impose GST output tax on sale but you claim input tax on purchases and expenses).
When was GST Introduced in Singapore?
Goods and Services Tax was introduced on 1 April 1994 in Singapore at the rate of 3%. On 1 July 2007, the indirect tax increased to 7%. With effect from 1 April 2018, the rate is 10%.
IRAS requires a business to register and pay Goods and Services Tax when its revenue exceeds the SGD1 million threshold and there are 2 ways - Retrospective and Prospective ways - of determining GST registration threshold.
Standard Rated Supplies
Most Sale of Goods in Singapore and Provision of Goods in Singapore fall under Standard Rated Supplies where the selling price of goods has to be adjusted by an additional percentage (7% in 2016) to take into consideration the GST (This is only applicable for a GST registered Business).
Zero Rated Supplies
Zero Rated Supplies refer to the Sale of Goods or Provision of Services where a GST Registered Business needs to imposed a 0% tax. This is applicable to the export of goods and provision of international services.
Zero Rated Supplies refer to the Sale of Goods or Provision of Services where a GST Registered Business needs to imposed a 0% GST. This is applicable to the export of goods and provision of international services.
Out of Scope Supplies
Out of Scope Supplies is where GST is totally not applicable. For example, the sale and delivery of goods outside Singapore and private or personal transactions.
GST Output Tax and Input Tax
The GST on Sale of Goods and Services is also known as the GST Output Tax which is the consumption tax you collect on behalf of the Singapore government when your customers consume your products or services. GST on Purchases, Expenses and Expenditure is known as GST Input Tax which is the consumption tax you are claiming back from the Singapore government because you did not consume the goods and services (i.e. you pass it on to your customers).
Difference between Zero Rated Supplies and Exempt Supplies
Standard Rated Supplies and Zero Rated Supplies are known as Taxable Supplies. If a Business generates revenue only from Taxable Supplies, the Business is allowed to claimed the GST input tax it paid for business goods and services (except for the items which is specifically disallowed by the GST Regulations).
However, if a Business generates revenue from both Taxable Supplies and Exempt Supplies, it has to satisfy the De Minimis Rule to claim all the GST input tax (except for the items which is specifically disallowed by the GST Regulations). Otherwise, the Business can only claim the GST input tax that is attributable to the Taxable Supplies.
De Minimis Rule
In order for a Business to satisfy the De Minimis Rule, the value of the exempt supplies must not be more than:
- SGD40,000 per month on average; and
- 5% of the total value of all taxable and exempt supplies made in that period.
Payment of Goods and Services Tax
Goods and Services Tax has to be paid within one month from the end of the quarter you have filed. However, for tax payers who are on GIRO deduction arrangement, GST will be deducted from their bank accounts will have another 15 more days before the amount is deducted from their bank accounts.
For example, if GST is filed for the quarter from July to September 2017, you have up to 31 October 2017 to make the payment. If you are on GIRO deduction arrangement, the GST payable will only be deducted on the 15th November 2017.
Major Exporter Scheme or MES
Major Exporter Scheme or MES is to cater to businesses with huge imports which will be exported later. Since these imports will be Zero Rated when exported, MES allows the Business to suspend the payment of GST import instead of getting it to pay for the import GST upfront (at the point of importation at Customs) and then claiming a refund on the import GST from IRAS via GST filing. This is to ease the cash flow of the Businesses as they need not pay the import GST upfront.
In order to qualify for MES, the following conditions must be satisfied:
- The Business’ Zero Rated supplies is more than 50% of the total supplies, or the value of Zero Rated supplies is more than SGD10 million for the past 12 months;
- The Business must maintain good internal controls and proper accounting records; and
- The Business maintain good compliance records with IRAS and Singapore Customs.
To apply for MES, the Business must complete the GST F10 Application Form and carry out one of the following:
- Perform a review under the Assisted Self-Help Kit (ASK) and submit the certified ASK declaration form;
- Participate in the Assisted Compliance Assurance Program (ACAP); or
- Perform a Post ACAP Review (PAR) and submit the PAR Declaration GST Form F28 for business which already has a valid ACAP status.
Once the Business has been granted the MES status, it is valid until IRAS notifies the Business to renew.
With the introduction of Customers' Accounting for some prescribed goods, GST filing with IRAS becomes more complex and therefore it is advisable to engage a qualified tax accountant to assist you with the filing.
Goods and Services Tax Consultants
Our Company has Tax Consultants who specialize in GST and are able to assist you in your GST filing and ASK Review for MES application. We also support our clients in their Corporate Tax filing, Form IR8E or AIS Filing for employees, Individual Tax Filing for Expatriates, Accounting Services, Corporate Secretarial Service, Accounting Software Setup, etc. Email us now for support on GST and other tax and accounting related matters. You may also call us at (+65) 6303 0625.