What is GST?
Goods and Services Tax (GST), also known as Value Added Tax (VAT), is a destination-based tax applied on goods and services of companies that cross the S$1 Million mark in taxable turnover in one year. The GST is applied at every step of the product cycle and is eventually trickled down to the consumer.
GST Rate in Singapore
The GST is set at 7% in Singapore, aims to unify the market and tax system, and is intended for the domestic market. The GST for exported goods and services is set at aa 0%.
Importance of GST
GST is an effective and more straightforward way of tax collection that is eventually injected back into the economy and is used for development purposes so the country can thrive and progress. GST filing Singapore is a crucial step toward prosperity, and avoiding it can result in penalties.
Singapore has a growing economy, and more and more corporates are commencing their business and hitting the S$1 million milestones every year, making it necessary to understand the basics of company GST registration Singapore.
This blog aims to provide a comprehensive view of the GST, how and when you have to register for it, and the consequences if you fail to.
Company GST Registration Singapore
The process to register your company for GST filing Singapore is pretty straightforward if you have some basic knowledge about it. Otherwise, ample guidance is available on online resources, and many experts also offer their services to make the process completely hassle-free for you.
To register, you need to fill up a GST F1 form and submit it to the Inland Revenue Authority of Singapore (IRAS). It requires paperwork preparation and an F3 form in which you acknowledge all the responsibilities you undertake as a GST-registered company. The paperwork details, along with the complete checklist, are available on the IRAS website.
Once everything is done, IRAS will process your application within ten days and assign you your GST registration number.
Compulsory Registration
The law does not only require registration for GST, but it is also a moral responsibility that every citizen must fulfil. It is a reason many companies tend to volunteer for GST collection even when they are not eligible.
But there are also cases when GST filing Singapore becomes mandatory, and you cannot evade it. These conditions include:
- Making S$1 million in the Year of Assessment (YA), last four quarters or one calendar year.
- Signing contracts, agreements, or deals that make it certain that your company will make S$ 1million in sales of goods and services in one year.
Violations
The law of Singapore requires company GST registration Singapore from you within 30 days of your eligibility, i.e., S$1 million in one year, failing to which can lead to penalties that will get severe with time.
Moreover, the invoices your company generates for the sales of your goods and services cannot read “Tax Invoice” if you are not registered for GST. It must only read “invoice.”
Consequently, you will not be allowed to charge the extra 10% as GST and cannot claim the GST paid to purchase goods.
Deregistration
Now that you understand the importance of registration and how to do it, let’s also discuss how and when you can deregister.
If your company is no longer eligible for GST, i.e., it does not generate a S$1 million turnover in 12 years and can prove it with documents, you can give an application to IRAS for deregistration.
If the drop in revenue is temporary and is likely to end in a year, you cannot apply for deregistration.
Exemptions
Like other taxes, the government of Singapore provides an exemption for GST for specific sectors to encourage people to join them and consumers to use them. For GST, there are two categories. First are plain Exemptions, i.e., the goods are services GST does not apply on. The second is Zero Rated, i.e., the goods and services GST is applicable on but is currently set at zero.
The exemptions include goods and services like selling or renting an unfurnished property, importing and supplying precious investment metals, financial services like issue of debt security, and services that have digital payment tokens like cryptocurrency.
Zero Rated supplies include export goods and international services, such as air flights.
GST transactions that take place outside of Singapore are considered “out of scope,” and no GST is charged on them. There are several Free Trade Zones (FTZs) and Zero GST (ZG warehouses that are treated as foreign soil, and any transactions happening on them are also considered out of scope for the government of Singapore. Hence, GST does not apply to these transactions in Singapore.
GST Refund
Since GST applies to most of the goods and services we use, it can be tricky, and there is a risk of multiple collections. The government address this concern with the concept of Input and Output Taxes.
Let us elaborate with an example. Consider that you own a business registered for GST, and you need raw materials to manufacture your product. In this case, you will pay GST on all the raw materials and include them in the cost of your product. Then you will also apply your own GST, and the price will go up further.
Such a situation will cause the consumer to pay the GST multiple times on one product. It will also discourage the customer from using that good or service and slow down the economy.
To avoid unnecessary price hikes, you can claim a refund of the GST you paid to purchase raw materials and keep the final prices of your product affordable.
