KNOWLEDGE BASE Goods - Services Tax in Singapore
Goods and Services Tax in Singapore
Goods and Services Tax (GST) is a broad-based consumption tax levied on the import of goods (collected by Singapore Customs), as well as almost all supplies of goods and services in Singapore. In many other countries, GST is known as the Value-Added Tax (VAT). GST is paid every time a customer buys a taxable good or service from a GST-registered business. Suppliers essentially act as GST collection agents.
To whom and what does the Goods and Services Tax apply?
The GST applies to you if you are a GST-registered business that supplies goods or services to customers. Your business must register for GST if:
your taxable turnover for the past twelve months, ending quarterly (Mar, Jun, Sep, or Dec), is over $1 million, or
you are making or intend to make taxable supplies and you can reasonably expect your taxable turnover in the next twelve months to be more than $1 million (e.g., you have signed a sales contract or business agreement).
If your business does not exceed $1 million in taxable turnover, you may still choose to voluntarily register for GST. The primary reason you would consider voluntary registration is to claim back the GST you incur through your own business purchases and expenses, i.e., the GST you pay when purchasing supplies for your business.
Sale of goods and services in Singapore and importation of goods into Singapore
GST applies to the sale of goods and services in Singapore, collected by the GST-registered business and paid to the Comptroller of GST, and the importation of goods into Singapore, collected by Singapore Customs at the point of importation. GST applies to goods and services if they are:
made in Singapore,
a taxable supply (see chart below),
made by a taxable person, and
made in the course of or furtherance of any business carried on by a taxable person.
GST applies to all imported goods (imported for domestic consumption, sale, re-export, etc.) regardless of whether you are GST-registered or not. As an importer, you are required to get the appropriate import permit and pay GST upon importation of your goods into Singapore. GST is charged based on the value of the goods, which includes cost, insurance, freight, commission, and any other incidental charges.
Here is an example for how GST taxes are calculated.
How do I comply with the Goods and Services Tax?
If you are a GST-registered business that renders goods or services to customers, you must collect the GST from your customers and send the tax money to the Inland Revenue Authority of Singapore (IRAS) on a quarterly basis via GST tax filing. In the case of imported goods, you must pay the GST at the point of importation regardless of your GST registration status. The Current rate of GST is 7%. There are a number of exemptions to the GST and there are also goods and services that are taxed at 0%.
The following mandatory record keeping requirements will help GST-registered businesses comply with Singapore tax law. The types of records that must be kept are:
documents that substantiate all business transactions, including: receipts, invoices, vouchers, other relevants documents issued or received by customers and/or suppliers, and bank statements;
accounting ledgers, schedules and journals documenting a business’ assets and liabilities, income and expenses, profits and losses, and;
any other written evidence of transactions connected with your business.
Business owners and directors are responsible for ensuring proper records are kept by putting in place a record keeping system that ensures GST declarations are duly supported by required documents. Records may be kept manually or electronically. Accounting software is recommended for electronic storage. The Inland Revenue Authority of Singapore has created a list, the IRAS Accounting Software Register, of accounting software that is compliant with its technical requirements. All records must be sufficient and up-to-date in such manner that would enable IRAS to verify the figures stated in your GST returns. Under the GST Act, businesses required to pay GST must keep their records for at least seven years, for accounting periods ending before January 1, 2007, after which the requirement changed to five years.
Risks of non-compliance
The Inland Revenue Authority of Singapore administers, assesses, collects, and enforces the payment of GST. Companies must comply with the requirements set out in the IRAS e-Tax Guide. Failure to comply may constitute an offense under Section 46(6) of the GST Act. Some of the risks include:
The IRAS exercising its best judgement to estimate revenue earned;
Expense claims, capital allowances or GST input tax claims being disallowed; and/or
penalties being imposed.
KNOWLEDGE BASE Goods - Services Tax in Singapore