Navigating GST in Singapore: Maximising Benefits, Minimising Drawbacks, and Utilising Tools

The introduction of GST in Singapore was a significant milestone in the country's economic development. Prior to GST, Singapore relied heavily on corporate and personal income taxes as its primary sources of revenue. However, this created an unfair burden on high-income earners and discouraged economic growth. GST was seen as a more equitable and efficient way of raising revenue, as it spreads the tax burden across all consumers and businesses.

For many new business owners in Singapore, understanding and complying with GST can be a daunting task. However, it is a crucial aspect of doing business in the country and can have a significant impact on a business's operations, finances, and overall success. In this article, we will explore the implications of GST for new business owners in Singapore.

Firstly, it is important to understand the basics of GST. In Singapore, businesses that have an annual turnover exceeding SGD 1 million are required to register for GST and charge GST on their taxable supplies. As of 1st January 2023, the GST rate is 8%. This means that if you run a business in Singapore and your annual turnover exceeds SGD 1 million, you are required to register for GST and charge GST on your taxable supplies.

For new business owners, registering for GST can be a complicated process. They need to understand the rules and regulations and ensure that they are complying with them. Failure to register for GST or to charge the correct amount of GST can result in penalties and fines, which can be financially damaging for a new business.

Advantages & Benefits of GST

Goods and Services Tax (GST) in Singapore is an essential aspect of doing business. While many new business owners may view GST as an added complication, it actually offers significant advantages and benefits that can help businesses thrive in the Singaporean market.

Generate revenue for the government

This revenue is then used to fund various social and economic initiatives, such as infrastructure development, education, and healthcare. By paying GST, businesses are contributing to the overall growth and development of Singapore, which in turn can lead to more opportunities for businesses to thrive.

Input tax credit claims

As a registered GST business, you will be eligible to claim input tax credits on the GST that you pay on your business expenses. This means that you can deduct the GST that you pay on your business expenses from the GST that you collect from your customers. This will help to reduce your overall GST liability. This can have a significant impact on the overall cost of running a business, particularly for those in industries with high expenses such as manufacturing and construction. By reducing costs, businesses can become more competitive in the market, offer more attractive pricing to customers, and ultimately increase profitability. 

To illustrate this point, let's consider a hypothetical scenario where a new construction company spends SGD 100,000 on building materials in a month. Without GST registration, the company would have to pay an additional SGD 8,000 in GST on top of the cost of materials. However, if the company is GST registered, it can claim back the SGD 8,000 in GST paid on its purchases, which reduces the overall cost of materials to SGD 100,000. This reduction in costs can then be passed on to customers, making their products more affordable and attractive, ultimately leading to increased sales and revenue.

Help businesses build credibility and trust with customers

By registering for GST, businesses are demonstrating that they are legitimate and professional operations. This can be particularly important for new businesses that are trying to establish themselves in a competitive market. Customers are more likely to trust and do business with companies that are registered for GST, leading to increased sales and revenue.

Furthermore, GST offers a level playing field for businesses of all sizes. By requiring all businesses with an annual turnover exceeding SGD 1 million to register for GST, the tax system ensures that all businesses are contributing to the development of Singapore. This means that smaller businesses are not at a disadvantage compared to larger companies, allowing for more opportunities for growth and success.

Simplify the tax system

Unlike direct taxes such as income tax, which can be complex and time-consuming to calculate and file, GST is relatively straightforward. Businesses simply need to charge the correct amount of GST on their taxable supplies and remit it to the government. This simplicity can save businesses time and resources that can be redirected towards other aspects of their operations.

Adopt environmentally friendly practices 

The Singaporean government has implemented tax incentives and rebates to encourage businesses to reduce their carbon footprint and adopt sustainable practices. By reducing their impact on the environment, businesses can not only contribute to a more sustainable future but also benefit from these tax incentives and rebates.

Disadvantages & Drawbacks of GST 

While there are many advantages to voluntarily registering for GST in Singapore, there are also some disadvantages that new business owners should be aware of. It's important to understand both the benefits and drawbacks of GST to make informed decisions about your business operations.

Administrative burden it places on businesses

Registering for GST, filing GST returns, and maintaining accurate records can be time-consuming and complex. This can be particularly challenging for small businesses with limited resources. The costs of hiring additional staff or outsourcing the management of GST can add up, reducing profitability and hindering growth.

Impact on cash flow

Businesses must pay GST on their taxable supplies and services, regardless of whether they have been paid by their customers. This can create a cash flow gap, where businesses have to pay out more money in GST than they have received in revenue. This can be especially challenging for new businesses that may have limited cash reserves.

Increase the overall cost of goods and services for consumers

Businesses pass on the cost of GST to their customers in the form of higher prices. This can make their products less competitive in the market, leading to a reduction in sales and revenue. This is particularly problematic in industries with high levels of price sensitivity, such as the retail industry.

Increase the administrative burden on consumers.

Consumers must keep track of the GST they pay on their purchases to claim back from the government, leading to additional paperwork and complexity. This can be especially challenging for individuals with limited financial literacy or those who make small purchases from multiple sources.

Impact businesses that operate internationally

Businesses that import goods and services may have to pay GST on their imports, increasing their costs. Similarly, businesses that export goods and services may have to compete with businesses from countries that do not impose GST or impose lower rates, leading to a disadvantage in the international market.

A source of confusion & frustration for businesses

The rules and regulations around GST are complex and subject to change, making compliance challenging. This can lead to misunderstandings, mistakes, and penalties, hindering the growth and success of businesses

Steps for Businesses to Register for GST in Singapore

If you're a business owner in Singapore, registering for GST is an important step that you may need to take. Here are some detailed steps that you should consider when implementing GST in your company:

Step 1: Determine if your business needs to register for GST

If your business has a taxable turnover that exceeds $1 million at the end of the calendar year, you are required to register for GST under the retrospective view. However, if your business expects to have a taxable turnover exceeding $1 million in the next 12 months, you are also required to register for GST under the prospective view.

If your taxable turnover does not meet these criteria, you are not obligated to register for GST. However, you may still choose to register voluntarily after considering the advantages and disadvantages of GST registration for your business.

The retrospective view considers the taxable turnover of your business at the end of the calendar year, while the prospective view looks at your expected taxable turnover for the next 12 months. It's essential to keep track of your business's taxable turnover regularly to determine if you are required to register for GST under either view. Consult with a tax professional to determine if registering for GST is the right choice for your business.

Step 2: Complete e-Learning course

To help businesses understand and comply with Singapore's GST regime, an e-Learning course is available that covers basic knowledge of GST treatment for common scenarios, the filing process of GST returns, compliance tips, and an overview of taxpayer's tax obligations. It is strongly recommended for all businesses applying for GST registration to go through the course. For voluntary GST registrants, the e-Learning course "Overview of GST" must be completed by the company director, sole-proprietor, partner, trustee, or preparer of GST returns, who must also pass the quiz within the course.

However, the e-Learning course is not required if the company director, sole-proprietor, partner, or trustee of the business has experience managing other GST-registered businesses, or if the person preparing the GST returns is an Accredited Tax Adviser (ATA) or Accredited Tax Practitioner (ATP). Additionally, businesses applying for registration under the Overseas Vendor Simplified Pay-only Registration Regime are also exempted from the e-Learning course requirement.

Step 3: Register for GST with IRAS

If you determine that your business needs to register for GST, the next step is to register with the Inland Revenue Authority of Singapore (IRAS).To access the GST registration digital service on mytax.iras.gov.sg, you need to be authorised in Corppass by the business. If no one in your company or third party has a Corppass account, visit our webpage on Corppass to learn how to register for one. You will need to prepare the required supporting documents in PDF format before starting the application process, and attach them at the end of the application. If you are registering for GST on a voluntary basis, you must sign up for GIRO for your GST payment and refund. Once you submit your GST registration application online, please mail the completed original copy of the GIRO application form to 55 Newton Road Singapore 307987.

Step 4: Collect GST from your customers

Once your business is registered for GST, you will need to collect GST from your customers on all taxable goods and services that you provide. The current GST rate in Singapore is 8%, and this rate will increase to 9% on January 1, 2024.

Step 5: Submit GST returns to IRAS

As a registered GST business, you will need to submit regular GST returns to IRAS. These returns will show the amount of GST that you have collected from your customers and the amount of GST that you have paid on your business expenses. You can submit your GST returns online using the myTax Portal.

Step 6: Keep accurate records

Keeping accurate records of your GST transactions is important for complying with GST regulations and for managing your business finances. Make sure to keep detailed records of all GST-related transactions, including invoices, receipts, and GST returns.

Tools that business owners should look into when implementing GST in their businesses

Here are some tools that we have found to be rather effective in helping businesses with their GST related implementation.

Accounting software

Accounting software can help business owners to manage their financial records, track their income and expenses, and generate GST invoices and reports. Many accounting software packages also have built-in GST compliance features, such as GST calculation and reporting.

GST compliance software

There are a number of software packages available that are specifically designed to help businesses comply with GST regulations. These software packages can assist with GST registration, invoicing, accounting, and reporting, and can help business owners to stay on top of their GST obligations.

GST consultants

GST consultants can provide valuable guidance and support to business owners who are navigating the complexities of GST compliance. They can help with GST registration, provide advice on GST-related issues, and assist with GST returns and other compliance requirements.

Government resources

The Inland Revenue Authority of Singapore (IRAS) provides a wealth of resources and information on GST compliance, including guides, forms, and online tools. Business owners can access these resources to better understand their GST obligations and to ensure that they are complying with all relevant regulations.

Training and education

There are many training and education programs available that are designed to help business owners and their staff to better understand GST compliance. These programs can provide practical insights and guidance on GST registration, invoicing, and reporting, and can help to ensure that businesses are operating in compliance with government regulations.

It's also worth noting that there are a number of online resources that can be helpful to business owners who are looking to implement GST. For example, the IRAS website provides access to a range of online tools and resources, including an e-learning course on GST compliance, a GST calculator, and an online GST registration system. There are also a number of online forums and communities where business owners can share information and best practices related to GST compliance.

Closing Words

Understanding the advantages, disadvantages and tools available for GST implementation in Singapore is crucial for any new business owner. While GST can bring about certain benefits such as access to government grants and the ability to claim back input tax, it is important to be aware of the potential challenges and costs involved as well. By utilising the various tools and resources available, such as GST registration services and accounting software, new business owners can effectively manage their GST compliance and minimise errors.

Ultimately, it is essential for new business owners to stay informed and up-to-date on any changes to the GST framework in Singapore. With the upcoming increase in the GST rate from 8% to 9% in 2024, it is important to prepare and plan ahead to ensure a smooth transition for your business. By taking proactive steps, seeking professional advice and leveraging available tools, new business owners can ensure that their GST compliance is well-managed and their businesses remain competitive in the long run.