GST PROS & CONS
What is GST in Singapore?
Goods and Services Tax, or better known as GST, is a general consumption tax that is levied on imported goods, as well as goods and services supplied in Singapore. GST is the equivalent of Value-Added Tax, or VAT, in other countries.
While everyone has common knowledge about GST as a consumer, business owners, especially new entrepreneurs, may wonder if they have to be GST registered, or if there might be any obligations or benefits that might come along with being a GST registered company.
According to IRAS, it is compulsory for a business to register for GST when its annual taxable supplies exceed $1 million, or if its expected taxable turnover in the following 12 months is foreseen to exceed $1 million. Businesses that do not fulfill these criteria are not required to register for GST, but they are nonetheless not forbidden from voluntarily registering for GST.
It is, however, important to note that once a business is registered for GST, they would not be able to de-register for the next two years. Therefore, a business that is considering voluntary GST registration should carefully ponder over the following pros and cons before making a decision.
Pros & Cons of Registering for GST:
- Businesses will be able to claim the GST (7%) that they have paid on business purchases used to make taxable supplies (i.e., input tax).
- Once a business is registered for GST, it would no longer have to worry about or constantly check if it is exceeding the threshold of S$1 million for compulsory registration of GST.
- Since most large and established businesses are GST registered, having one’s business to be GST registered can instil in the customers an impression that the business is established and of a certain magnitude.
- Being GST registered brings about additional administrative workload because there are duties and responsibilities that a GST registered business will be obligated to fulfil.
- Business owners will have to take out time and expend effort to understand how GST works, or hire an accountant to undertake this work. The latter, though a more productive option, will impose additional costs on the business.
- Increased selling prices (by 7%) due to GST registration may prove to be disadvantageous to growing businesses if many of their suppliers are not GST registered and are unable to recover the GST that they have been charged with.
What do you need to do after the company is registered for GST?
As mentioned previously, a company that has registered for GST has to remain registered for at least two years. GST registered businesses are also required to comply with the following conditions:
- A GIRO account will have to be maintained in order to process the payment and refund of GST.
- The business will have to begin production and/or provision of taxable supplies within two years if the business has yet to do so at the time of GST registration.
- Comply fully with the responsibilities of a GST-registered business (see below).
- Any other conditions which may be imposed by IRAS at any point in time during your registration.
Responsibilities of a GST-Registered Company:
- Charge and account for GST for Standard-Rated Supplies – A GST-registered business is required to charge and account for 7% GST on goods and services supplied in Singapore.
- File GST Returns – GST returns must be filed accurately and the tax due must be paid on time. Failure to do so will result in monetary penalties being imposed. Even if there were no transactions, a “NIL” GST return still has to be submitted in a timely manner.
- Keep Proper Business and Accounting Records – All business and accounting records will have to be kept for at least 5 years.
- Display Prices with GST – the GST-inclusive prices of the business’s goods and services must be displayed prominently in all cases. Failure to do so is considered a punishable offence, with a fine of up to $5,000.
- Issue Tax Invoices with GST Registration Numbers – Tax invoices with the business’s GST Registration Number must be issued for standard-rated supplies.
- Inform IRAS of Changes – Any change related to the business (e.g., change in registered address or business name) has to be reported to the Comptroller in no longer than 30 days.
- Accounting for GST at Point of De-Registration – Upon de-registration of GST, business assets held on the final day of registration has to be accounted for if: (1) these assets amount to more than $10,000 and; (2) if GST was previously claimed for the purchase of these assets.
Need help in registration of GST or GST filing?
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