Goods and services tax (GST) was first introduced in Singapore under the Goods and Services Tax Act (GSTA) on 1 April 1994. The Comptroller of Goods and Services Tax levies this tax upon the supply of goods and services in Singapore by any taxable person in the course or furtherance of a business, as well as upon the import of goods into Singapore. Singapore Customs collects GST upon the importation of goods.
A GST-registered trader must charge GST on taxable supplies of goods and services made to its customers. The tax charged is known as the output tax. The GST suffered on purchases and expenses incurred in the course of business is known as input tax and can be claimed as an input tax credit against the output tax collected. The tax is collected at each stage of the transaction process involving a good or service, with the ultimate consumer bearing the tax. In this regard, GST does not normally become a business cost to a GST-registered business as it merely acts as a collecting agent for the Comptroller of GST.
Rates of Tax
In general, for GST purposes, a supply is either taxable or exempt. A taxable supply is one that is standard-rated or zero-rated.
A standard-rated supply is liable to GST at 7%.
A zero-rated supply means that GST applies to a specific supply at a 0% rate. Only goods that are exported and services that qualify as international services are zero-rated. GST-registered traders need not charge GST on their zero-rated supplies but may request a refund of any GST they have paid on purchases for the purposes of their business.
If a supply is exempt from GST, no tax is chargeable on it. The sale and lease of residential properties, provision of prescribed financial services and supply of investment precious metals are exempt from GST in Singapore. GST-registered traders who make exempt supplies are not entitled to claim the input GST paid on goods and services supplied to them for the purposes of their business.
A taxpayer who makes taxable supplies is required to register with the Comptroller of GST if:
- at the end of any quarter, the total value of all its taxable supplies in Singapore for that quarter and the three quarters immediately preceding that quarter exceeds S$1 million, or
- if it is reasonable to believe that the total value of its taxable supplies will exceed S$1 million in the next 12 months.
Businesses with annual turnover of taxable supplies of less than S$1 million may request for GST registration on a voluntary basis. The voluntary registration of a person by the Comptroller of GST is discretionary and requires the taxpayer to:
- participate in the GIRO scheme (an interbank electronic payment system) for the payment and/or refund of GST prior to GST registration
- provide a security deposit as may be imposed by the Comptroller of GST on a case-by-case basis
- complete the e-Learning course "GST-Before I Register" and its quiz before submitting the registration form
- complete the e-Learning course "Introduction to GST" within three months from the effective date of registration
- remain GST-registered for at least two years
- make taxable supplies within two years if the person has not started making taxable supplies at the point of applying for GST registration
- comply fully with the responsibilities and obligations of a GST-registered person, and
- any other conditions as may be imposed by the Comptroller of GST.
Non-resident overseas business
A non-resident overseas business that makes annual taxable supplies in Singapore exceeding S$1 million must register for GST. It must also appoint a local agent who will act on its behalf for all its GST matters. This agent is responsible for the accounting and payment of GST on behalf of the overseas business entity. The procedure to register for GST is similar to any local company. In general, registration for GST is made by completing the Form GST F1 and submitting it together with necessary supporting documents to the IRAS.
Failure to register for GST
A person who fails to register for GST may face a fine no greater than S$10,000 as well as a penalty equal to 10% of the tax due for each year from the date on which the person was required to apply for registration. In the case of a continuing offence, the person faces a further fine of up to S$50 for each day during which the offence continues after conviction.
Non-resident businesses that are registered for GST in Singapore must appoint a representative. The representative must keep GST records and accounts and account for GST on behalf of the overseas business it represents. In practice, the non-resident business may only appoint one person at a time to act on its behalf, although a representative may act for more than one principal at any time. The representative must keep separate GST accounts and make separate GST returns for each principal it represents. No permit is required for the representative.
Returns, Payment and Penalties
A GST trader must file electronic GST returns and make GST payments on a quarterly basis tied to the trader's financial year (eg a calendar year trader would file and pay GST based upon quarterly accounting periods ending in March, June, September and December).
The due date for filing GST returns and making GST payments is one month after the end of the accounting period covered in the GST return. For example, if
the GST return is for the quarter ending March 2016, the due date to file the return is 30 April 2016.
If the tax is not paid by the due date, a 5% penalty for late payment will be imposed. It will be imposed on an estimated tax if no GST return has been submitted. If a GST return was submitted but payment was not made, the 5% penalty will be imposed on the tax declared in the GST return.
If the payment remains unpaid 60 days after the 5% penalty for late payment is imposed, an additional 2% penalty may be imposed for every complete month that the tax remains outstanding. However, the total additional penalty shall not exceed 50% of the tax outstanding.
GST electronic services
The IRAS provides e-Learning courses to help taxpayers understand the capabilities of GST e-Services and how to e-file their GST returns. Details of such e-Learning courses are available at www.iras.gov.sg.
Taxpayers may claim input GST as a deduction when submitting the GST return to the Comptroller of GST. The total input tax paid on business purchases can be deducted from the total output tax collected from customers. The resulting difference is the net GST payable or net GST refundable.
The following are general conditions that a taxpayer must satisfy to claim input GST:
- the goods or services must have been supplied, or the goods must have been imported, by the claimant
- for imports, the claims must be supported by import permits
- the goods or services must be used, or intended to be used, for the purpose of the claimant's business
- the input tax must be directly attributable to taxable supplies, or out-of-scope supplies which would be taxable if made in Singapore
- the input tax claims must be supported by tax invoices addressed to the claimant, and
- the input tax claims must not be disallowed expenses under reg 26 and 27 of the Goods and Services Tax (General) Regulations (GSTGR).
Partially exempt traders
GST-registered traders that make both taxable and exempt supplies (known as partially exempt traders) may be provisionally allowed to claim all input tax incurred in the making of exempt supplies if the partially exempt trader is able to satisfy the de minimis rule. Currently, a taxpayer meets the conditions of the de minimis rule when the total value of all exempt supplies made is less than or equal to:
- an average of S$40,000 a month, and
- 5% of the total value of all taxable and exempt supplies made in that period.
Exempt supplies mainly relate to financial services and transactions such as interest income from bank deposits. In addition, partially exempt GST traders that only make certain prescribed exempt supplies (such as assigning of receivables) are allowed to claim all input tax even if they have failed the de minimis rule.
Blocked input tax
The following expenses are disallowed from input tax claims:
- club subscription fees (including transfer fees) charged by sporting and recreational clubs
- medical expenses, medical and accident insurance premiums incurred by employees
- benefits provided to the family members or relatives of employees
- costs and running expenses of a motor car (except for Q-plate cars with a certificate of entitlement issued before 1 April 1998)
- expenses incurred on rental cars hired on or after 1 July 1999, and
- transactions involving betting, sweepstakes, lotteries, fruit machines or games of chance.
Accounting records are required to be kept for five years. Records can be kept in electronic form as long as the guidelines set out in the IRAS e-Tax guides "Keeping of Records in Imaging Systems" and "Keeping Machine-sensible Records and Electronic Invoicing" (available at www.iras.gov.sg ) are adhered to.
The information in this newsletter first appeared in the Crowe Horwath’s Quick Guide to Business Tax in Singapore 2014 (4th Edition), published by CCH Asia Pte Limited.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.