GST is the acronym for Goods and Services Tax in Singapore which is also known as VAT (Value Added Tax) in many other countries. The GST is a broad-based consumption tax based on imported goods and supplies in Singapore. Collection of the tax on imported goods is the responsibility of Singapore customs, while the tax on supplies of goods and services is charged and collected by the business based on value added stages.
The GST is remitted to the Inland Revenue Authority of Singapore (IRAS) for deposit in the general fund. However, the actual taxes remitted represent a net amount between the taxes paid on business purchases (input tax) and the taxes collected from customers (output tax) to ensure that the value added to goods and services is only taxed once. An experienced Singapore accountant can work with a business to develop a system that ensures all credit mechanisms are in place to avoid filing errors such as over/under claim of input tax, over/underpayment of output tax, or late filing.
Most goods and services are subject to the GST, but there are a few exemptions. Exemptions are applicable to financial services and the rental and sale of residential properties. The current GST rate is 7%. The tax has been collected since 1994, and in 2010 there was a total of S$5.2 billion collected on imported goods and locally manufactured goods. The majority (99%) of the tax is on imported goods.
In an interesting approach, companies that generate less than S$1 million turnover can register for the GST on a voluntary basis. It is compulsory for any business with turnover exceeding S$1 million turnover to be GST registered. Voluntary registration benefits the company with turnover below S$1 million to enable the claim of GST as tax credit or to claim a refund from the IRAS when the amount paid exceeds the amount collected.
The prevailing rate of 7% for the GST is chargeable on all taxable sales of goods and services. GST is charged at 0% on exports of goods and provisions of international services. The provision of financial services and the sale and lease of residential properties are exempt supplies. GST is not chargeable on exempt or out-of-scope supplies. Out-of-scope supplies transactions are those where goods are delivered from one place to another and both ends of the transaction take place outside of Singapore.
Registration for GST begins with completion and submission of the Form GST F1 to IRAS. GST returns must be submitted within one month from the end of each accounting period which is, by default, on a quarterly basis. However, depending on business needs, it is possible to request a change in filing frequency. Clearly, the accurate tracking and reporting of GST is important. Most companies rely on their Singapore accountants to set up necessary collection, accounting and reporting functions for the GST. Incorrect reporting or non/late filing can be costly and may result in penalties or even an imprisonment term up to six months.