What is GST?
GST means Goods and Services Tax. For consumers, GST is an integrated tax that is incorporated into the price of goods and services in Singapore. Currently, the GST in Singapore is set at a standard rate of 7%, regardless of the nature of goods or services provided.
For companies, if you are a GST-registered business, it means that you collect GST on behalf of the Inland Revenue Authority of Singapore (“IRAS”) by including GST into the prices of your products and services; and then claim GST credits back on the products or services purchased as business expenses. Non-GST-registered companies will not be able to do so.
In short, the basic principle of GST can be summarised as follows:
Exemptions to GST
Generally, the following goods and services are exempt from GST:
- 1. Financial services;
- 2. Sale and lease of unfurnished residential properties;
- 3. Importation and local supply of investment precious metals
- 4. International services; and
- 5. Exported goods
To check if your business activity is exempt from GST, consult your tax specialist.
In addition, there are general GST schemes that provide specific exemptions to GST-registered companies. A snapshot of these GST schemes is presented in the table below:
Why understanding GST registration is important
Notwithstanding the fact that Singapore has a very pro-business climate, it takes abuse of the GST system very seriously, as this means that companies are either unfairly overcharging their customers or evading their tax responsibilities. To encourage companies and consumers to be more vigilant, IRAS grants cash rewards of up to 15% to informants who report errant companies that do not pay their GST or have falsely charged their customers GST.
Errant companies can be fined up to S$10,000 and pay a penalty equal to 10% of the tax due from the date on which the business is required to register for GST. This means that the company would be liable for all GST payments since the date it was required to register for GST, even if there was no GST collected from its customers.
As part of its regular enforcement, IRAS conducts audit programmes, which utilises data analytics tools to corroborate data and detect anomalies. In the course of such audits, IRAS may request for the following information:
- * Business information and its activities
- * Sales and purchase listings to verify accuracy of the figures reported in GST returns
- * Supporting documents for business transactions
- * Self-review checklists completed by the company
- * Review of the company’s accounting system and how transactions are recorded
In addition, IRAS may request additional confirmation and information from the company’s customers, suppliers and banks. Hence, companies should be aware of the importance of maintaining proper records and should educate its employees, to avoid damage to their business reputation or excessive disruptions to their business operations.
Read more about Singapore Goods and Services Tax (GST) at Singapore Company Incorporation website.
