Goods and Services Tax GST-What you need to know
You may have repeatedly heard the term "GST" in Singapore. For the curious, Goods and Services Tax (GST) is a broad-based tax on domestic consumption. This tax is paid when cash is spent on goods and services that are supplied by a taxable person in the course of his business, and on goods which are imported into this country. The only exceptions in this category are the sale or lease of residential properties which are treated as exempt supplies.
To make it simpler, Goods and Services Tax GST is actually the equivalent of Value Added Tax (VAT) in most countries. Here, however, GST is pegged at a considerably lower rate than most Asian countries. In fact, GST is currently charged and accounted at a rate of 7% on the value of supply.
There are basically three components in each company’s turnover (also known as sales). The first component is sales invoices issued to parties within the country. If a company is GST registered, this is known as standard rated supplies, as it includes the GST charge.
The second component may be sales that are exported out of the country. This is known as zero rates supplies, if a company is GST registered, as the sales do not include the GST charge.
The third component may be sales that are deemed out of scope, if a company is registered for GST. Out of scope means the goods sold are purchased from country A and sold to country B directly, without the goods entering into Singapore.
When do you need to register?
You must register for Goods and Services Tax GST, if at the end of each of the following quarters, March, June September and December, irrespective of your actual financial year end, your taxable supplies amount to more than SGD1 million in total for that one quarter and the past consecutive three quarters.
Or at any time, if you expect your taxable supplies to exceed SGD1 million in the next 12 months.
Therefore, from the above, if a company is not yet registered for GST and is nearing the threshold of S$1 Million, it has to constantly monitor the taxable supplies. The next question that arises is what is taxable supplies?
Taxable Supplies includes the first component and the second component of a company’s sales as explained above. It does not include the third component.
It is important to monitor the taxable supplies as a company may actually have crossed the threshold and ideally it should register for GST if it is nearing this important marker, not after. Once a company has crossed the threshold it is required by law to register for GST within 30 days.
An exception to the rule of compulsory registration, even if a company has actually crossed the threshold of S$1 million in sales (due to some extraordinary circumstances), is if the company can provide evidence that it is unlikely to cross the threshold again in the next twelve months.
Here is an important note: GST registration for companies with annual turnover below $1 million is not mandatory. If you, however, believe that it makes economic sense for you to register your company for GST, then you can opt to register voluntarily. Once you register voluntarily, you must stay registered for a continuous period of two years. It is now compulsory for companies voluntarily registering for GST to be on a GIRO plan for the purposes of payments/receipts of GST.
If you have outstanding tax penalties, or are a director/partner/sole proprietor of other business which have outstanding taxes or penalties, you may be required to provide a security deposit upon registering for GST. If you are a proprietor or a partner with numerous companies the requirement for you to register for GST will depend on the total aggregate of the turnover of these businesses.
Late Notification of Liability for GST Registration
Please note that if you are required to register for Goods and Services Tax GST, you must apply within 30 days of becoming liable. If you fall in this category of mandatory GST registration, and if you fail to apply within the time stipulated, you may be fined up to S$10,000 and pay a penalty of 10% of the tax due.
All GST incurred on expenses before an entity is registered for GST was not claimable. However, those entities registered for GST from 1st July 2015 onward are now allowed to claims GST on expenses and on goods held for sale that has been incurred or acquired within 6 months of registration.
New Price Display Requirement
From 1st April 2015 all GST registered entities, if displaying prices to the public, quoted or given verbally must give equal importance to display and or quote prices inclusive of GST as well as exclusive of GST.
GST – (ASK) Annual Review
GST-ASK also known as Assisted Self-help Kit is a self-assessment tool that all GST registered businesses can use for voluntary compliance. It also assist in the detection of past errors, if any, in the returns previously filed.
ASK is a requisite for some GST schemes on application for registration and or renewal, such as the Major Exporter Scheme, and can be performed by an individual who is an Accredited Tax Advisor-GST or Accredited Tax Practitioner-GST.
ASK annual review can be conducted by the business itself, or an employee of the business who is an ATA-GST or ATP-GST or by an external firm who is similarly qualified.
There are numerous benefits in implementing the ASK review, one of which is the disclosure of past filing errors voluntarily and the avoidance of the 5% late payment penalty.
We have ATA-GST qualified personnel in our company who can assist in the performance of the ASK compliance or conduct an in depth GST audit.