This article was published on 28/08/2020 and updated on 03/05/2023 for additional information
The Goods and Services Tax (GST) was first introduced on 1st April 1994 as a broad-based consumption tax levied on almost all supplies of goods and services in Singapore. As a consumer, you would definitely have noticed that not all transactions consist of GST, and of course, more than happy to pay the amount as it is.
However, as a business owner, things may not be so straightforward. Do you know when are you required to register with the Inland Revenue Authority of Singapore (IRAS) as a GST-registered company? When is it mandatory, and what are the criteria and application process?
Whether you are running your business as a private limited entity or as a sole proprietorship, it is important that you are aware of your obligations as a GST-registered company, as well as the benefits and implications that come with it.
Here are 5 key things you need to know for your company to be GST-registered:
- S$1 million annual turnover
Your company’s annual turnover determines whether your company is liable for GST registration, as this refers to the value of goods and services that is provided by you and are regarded as taxable supplies for GST purposes.
If your company’s annual turnover is more than S$1 million in the past 12 months, it is mandatory for your company to be GST-registered. To determine your GST registration liability, you can refer to the GST Registration Calculator from IRAS.
On the other hand, if your annual turnover has not hit S$1 million in the past 12 months, but you are expecting to generate at least S$1 million in the next 12 months, then you will need to register for GST. You will be required to provide the following supporting documents:
- Signed agreements or contracts with customers
- Confirmed purchase orders or quotations from customers
- Income statements for the past 12 months to show that annual turnover is close to S$1 million and is expected to increase
- Annual turnover less than S$1 million but wants to be GST-registered
If your company’s annual revenue is less than S$1 million, you are not required to register for GST. However, there may be situations where it favours your company to self-register as a GST-registered company.
After weighing the pros and cons, and if you still choose to be part of the voluntary GST registration, the following conditions have to be fulfilled:
- Business owners have to complete two e-learning courses on “Registering on GST” and “Overview of GST” and pass the quiz.
Exceptions are provided for the following:
- Business owners who are experienced in managing other current GST registered businesses; or
- The person who prepares the company’s GST returns is an Accredited Tax Advisers (ATA) or Accredited Tax Practitioners (ATP); or
- Company is applying to be registered under the Overseas Vendor Simplified Pay-only Registration Regime.
- Sign up for Giro for payment and / or refund of GST
- Place a security deposit imposed on a case-by-case basis
However, please note that you have to remain GST-registered for at least two years after registration, and you need to comply fully with the responsibilities as a GST-registered business. - Benefits of being GST-registered
One benefit of being a GST-registered company is that you can claim the GST incurred on your company’s purchases, subject to the conditions for claiming input tax.
Furthermore, if your business turnover is near S$1 million, or you have voluntarily registered for GST, this means that you will not need to constantly monitor your turnover in case it reaches the threshold for compulsory registration.
Being a GST-registered company also means that bookkeeping and documentation processes are in compliance with GST, and this ensures the timeliness of GST return filing. With a proper internal process, your company can file for GST returns on time every quarter.
Lastly, as there are requirements and standards to uphold as a GST-registered company, it is likely to leave the impression on customers that your company is established and is of a certain size.
What are the GST related service fee that your accountant will likely charged you?
1. GST Voluntary Registration: Approx S$300
2. GST F5 Reporting and Filing: From S$150/ per quarter
- Drawbacks
Your company has to understand the complexities of GST and the additional responsibilities you need to fulfill, thus this could translate into increased administrative and manpower costs.
Once you are GST-registered, you will have to increase your selling price by the prevailing GST rate, currently at 7%. If your customers are GST-registered, they will be able to claim the GST that you charge. However, non-GST-registered customers, especially normal retail customers, are likely to be displeased since they will not be able to recover the GST that is imposed.
- How does it affect your accounting?
Being a GST-registered company means that you are a GST collecting agent of the government. As mentioned above, there will be more administrative responsibilities for your company to adhere to. To ensure your company remains compliant with the regulations, here are some tasks you need to be mindful of:
- Charge and account for GST on standard-rated supplies
- eFile your GST returns timely
- Pay your GST dues timely
- Correctly display prices with GST
- Issue tax invoices with your GST registration number
- Maintain accurate tax records
- Notify IRAS of any changes related to your business within 30 days
Most importantly, please note that you are required to apply for GST registration within 30 days from the date your liability to register arose. If your company is liable to register for GST and you have not done so, there will be serious consequences for late registration (source from IRAS):
- Your date of registration will be backdated to the date that you were liable to be registered.
- You will have to account for and pay GST on your past sales starting from the effective date of registration, even if you did not collect any GST from your customers.
- You may face a fine of up to $10,000 and a penalty equal to 10% of the GST due. Prosecution action may apply.
If you submit an application for GST registration and voluntarily disclose that you are late in registration, IRAS will generally waive the late notification fine and penalties. If you have difficulties paying the GST due on the backdated period, IRAS may allow you to pay the GST due in instalments.
Note that for all GST registered companies, SMEs need to keep proper business and accounting records for at least five (5) years.
Here's a step by step guide on Registering for GST by IRAS.
This article is co-written by Smart Towkay and Verti.
Verti provides sound accounting business support for SMEs and MNCs in Singapore.
With customised accounting solutions, Verti empowers businesses with the ability to quickly adapt and stay relevant to the market’s ever-changing needs.
Read also: COVID-19: Smart Towkay's Essential Business Survival Guide for this Pandemic
Read also: COVID-19: How Can Singapore's SME Relief Measures Help Businesses During This Pandemic
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