Singapore has had GST in place since 1994. However, in spite of this fact, some are still confused about the specifics about GST and what it entails. This guide will provide a closer look at GST and what has to be done regarding it.
GST is an acronym for Goods and Services Tax. It was introduced on April 1, 1994, as part of the Goods and Services Act. Singapore is one of many countries around the world that imposes GST on certain purchases made. In Singapore, GST is a consumption tax imposed upon purchase of any taxable goods and services as well as the importation of goods. GST is a multi-stage tax to be collected after each stage of the production and distribution chain. The current GST rate in Singapore is 7%, up from the 3% rate which it was at when it was introduced. The GST rate will be raised to 9% at some point between 2021 and 2025.
All supplies in Singapore are divided into three categories with regard to GST. These categories are standard-rated supplies, zero-rated supplies, and exempt supplies. Standard-rated supplies have the usual GST rate of 7% imposed on them. Most sales of goods and provisions of services in Singapore are standard-rated. The importation of goods into Singapore is also standard-rated. Although zero-rated supplies technically have GST charged against them, they are effectively exempt from GST. This is because such supplies have a GST rate of 0% charged against them. Examples of zero-rated supplies include services which are deemed to be of an international nature, as well as exports of goods. Exempt supplies are also known as non-taxable supplies. GST does not apply when exempt supplies, whether they be goods or services, are purchased. Exempt supplies include the importation of local supply of investment precious metals, sales and rentals of residential property that has not been furnished, and the majority of financial services.
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GST and Businesses
Businesses are required to register for GST once their taxable turnover exceeds S$1 million or if it is expected to do so over a coming 12-month period. However, businesses with a taxable turnover of less than S$1 million may nevertheless register for GST on a voluntary basis. Businesses that have registered for GST are required to impose GST at the prevailing rate on their supplies. The GST which has been charged and collected is referred to as output tax. GST-registered businesses are to pay output tax to the Inland Revenue Authority of Singapore (IRAS).
GST incurred on business purchases and expenses is known as input tax. These purchases and expenses include imports of goods. Input tax may be claimed on business purchases and expenses if the business fulfills the necessary criteria for claiming input tax. Only GST-registered businesses are allowed to claim input tax. Input tax functions in such a way so as to prevent anything more than the value added from being taxed at each stage of a supply chain.
GST-registered businesses must submit a GST return to IRAS within one month of the end of the prescribed accounting period. A GST return must specify both input tax and output tax. If the GST return has not been submitted by the deadline, a 5% penalty and subsequently an additional 2% penalty (not exceeding 50% of the tax to be paid) will be imposed at the end of each month that the tax is not paid.