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2023 GST Rate Change: A Comprehensive Guide from IRAS e-Tax

IRAs
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In the 2022 budget, Singapore’s finance minister announced a two-step increase in the Goods and Services Tax (GST) rate. The first increase will be from 7% to 8%, effective from January 1, 2023, and the second increase will be from 8% to 9%, effective from January 1, 2024. 

To facilitate this transition, the Inland Revenue Authority of Singapore (IRAS) published a comprehensive guide for GST-registered businesses to prepare for the upcoming changes.

The IRAS e-Tax guide provides a thorough overview of the transitional rules for reverse charge supplies, imported digital services under the Overseas Vendor Registration (OVR) regime, as well as methods of apportionment and new regulations regarding imported Low-Value Goods (LVG) and non-digital services. 

By understanding these changes, businesses can effectively plan and smoothly transition to the new GST rates.

Read Also: Assurance Package and What Business to Start in Singapore

Overview

GST is an indirect tax on goods and services paid by consumers and remitted to Singapore’s Revenue Authority by businesses. It serves as a revenue source for the government.

The Inland Revenue Authority of Singapore (IRAS) ensures companies register for GST and offers voluntary registration options. GST-registered businesses must file returns with IRAS.

GST aims to generate government revenue and eliminate the cascading effects of other indirect taxes, while also being applied to imported goods levied by Singapore customs.

Current GST Rate in Singapore

The current GST rate in Singapore is 8%. The revenue authority of Singapore requires GST-registered businesses must levy and account for a GST rate of 8% on all the goods and services they sell in Singapore unless the goods sales are exempted or zero-rated within the GST law.

Reasons for the 2023 GST Rate Change

The government derives revenue from various taxes, such as personal income tax, corporate tax, and Goods and Services Tax (GST). Here are some reasons for the decision to increase the GST rate in Singapore:

  • Aging Population: 1 in 7 Singaporeans is currently 65 years or older, which means the healthcare budget needs to expand to accommodate their needs. The GST increase helps to secure funding for the elderly.
  • Preschool Education: To provide quality, accessible, and affordable early childhood and childcare education, the government requires additional funding, which can be met by raising the GST rate.
  • Security: In the face of threats like terrorism and cyber-attacks, increased investment in security is essential for Singaporeans’ safety. The GST rate increase will help support these investments.

taxation concept, tax form or paper legal document

Adapting to the 2023 GST Rate Change: Key Considerations for Businesses and Consumers

In anticipation of the 2023 GST rate change, it is crucial for businesses and consumers in Singapore to understand the upcoming adjustments and their implications. This section highlights the key aspects of the rate increase, its impact on businesses and consumers, as well as the transitional arrangements to ensure a smooth transition:

Businesses: Display prices including GST, issue tax invoices, and adapt to new GST rates

One of the impacts of the GST rate is that businesses will have to display prices, including the GST. The government requires both resident and foreign businesses must always incorporate the GST in their price display and not display a different line item for GST.

It will come in handy to assist customers in knowing the amount of money they are paying for taxes and enable them to compare different prices within different businesses.

Another impact on businesses is that they must issue tax invoices if they sell goods and services linked with GST. The advanced GST must contain the amount and be issued within 30 days of the sale.

Also, this helps customers be aware of the amount they are paying for taxes and makes businesses keenly and accurately track their claims and GST payments.

Transitional Arrangements for Business: Update systems, display new GST rates, and apply proper GST rates for transactions

Regarding the transitional arrangements for business, they need to do the following according to the inland revenue authority (IRAS):

1. Update their Systems

Businesses should update all the financial software systems they utilize daily to the current or new GST rates. It implies that you should use 8% as a GST rate as a business person. Additionally, systems like accounting, ERP software, retail management systems, invoicing, and point-of-sales systems will have to be updated.

You can consult your partners and vendors to help you update since they may know the procedure. For the systems that are complex to upgrade, you will have to get the help of a vendor physically to help you upgrade to the new GST rate.

2. Update Price Displays to Show the New GST Rates

As a business person, you must update and display your prices to show the shift in prices because of the rise of GST rates. You must use price tags, advertisements, price lists, websites, and publicity brochures inline with the revenue authority of Singapore.

Also, remember that for every price you quote, whether verbal or written, you must include the new GST rates. Let your customers know the exact and final price they will have to pay for your goods and services.

If you find it difficult to change the entire price display in time, you can show two things, and they include:

  • All the prices containing 7% GST, which you got before 1st January 2023.
  • Prices incorporating an 8% GST rate as of 1st January 2023.

Be aware of transitional rules for the increase of GST rates. You should also apply the proper GST rates for transactions, sales, and reverse charge supplies starting 1st January 2023.

For example, if you are selling supplies before 1st January, you should have charged 7% GST. On the other hand, starting 1st January 2023, you should use a new rate of 8%.

Regarding the goods and services standing between the date of the change of GST rate, you will have to check the transitional rules to know whether to incorporate the new or old GST rate. You can use the IRAS e-Tax guide for specifically GST- registered businesses.

Consumers: Transparent, single tax amount on goods and services

One impact of goods and services tax on consumers is that they will spend but get transparent and a single tax amount for the goods and services they are buying.

Registration and Compliance

Regarding registration and requirements, it’s usually highly recommended that Singapore companies that surpass a specified threshold for their GST register for the rate. The remaining companies that do not exceed the revenue threshold can voluntarily register if they want to.

Moreover, all the GST-registered companies will have to charge GST and file their returns. It is also vital to note that once you have registered your company, it remains registered for two years. 

Companies are usually needed to register and have the GST when:

  • The entire taxable turnover for the previous 12 months is more than S$ 1 million
  • The company looks forward to surpassing S$ 1 million in taxable turnover for 12 months.

Here is the registration procedure:

1. Make an Application for GST Registration with Revenue Authority of Singapore (IRAS)

The filling agent or business can submit its application online or on paper submission. You can use the myTax Portal to carry out online submissions. Alternatively, your company can send a paper application to 55 Newton road, Revenue House, Singapore. You should also note that as a company, you don’t have to impose GST until you receive approval from IRAS.

2. Get the Notification Confirmation Message of the Effective Registration Date Specifically from IRAS

Once the Inland Revenue Authority approves your registration, you will get a confirmation letter from IRAS stating that your company is registered for GST. You will find below information on the letter:

  • Your business GST registration number.
  • The compelling business date from GST registration.

3. Changes to GST Returns and Invoices

Once you register your business, you must file a GST F5 tax return specifically to the Inland Revenue Authority of Singapore. In addition, you must file the returns electronically using the myTax Portal quarterly or monthly.

Even if you do not transact business during the accounting duration, your business must file a nil return. Your company must also issue GST to the Inland Revenue Authority (IRAS) 1 month after filing the F5 return. Companies must submit both output and input tax.

As a business person, you must also account for and charge a GST rate of 7%, majorly on the tax invoice provided to your customer as of 20th December 2022. Since the services or goods were delivered before 1st January 2023, you don’t have to adjust to a new rate for this case.

Exemptions and Zero Rating

Any business registered under GST and zero-rate supplies can claim the input tax paid on supplies. On the other hand, exemptions are goods that are not charged with GST. In other words, you do not issue GST on exempt supplies.

Exempt and zero-rated items include the sale and lease of residential properties, digital payment tokens, financial services, and local and import supplies of precious investment metals. International and export services are also exempted from GST since the goods are zero-rated.

Additional Resources for Taxpayers

If you want to contact the Inland Revenue Authority, you can book an appointment at least two working days before visiting their offices. You can also email or call them, and you’ll be assisted. Please note that government agencies always communicate through .gov.sg

It is important to note that the Income Tax Act 1947 and the Goods and Services Tax Act bind the IRAS to preserve the secrecy of tax payers except under special circumstance certain government agencies need you information. The Budget 2022 introduced new legislation that allow the IRAS to disclose certain information to government agencies without your consent.

Closing

The purpose of GST is to bring revenue to the Singapore government for it to carry out its operations well. Businesses or companies must charge the new GST rate of 8% for 2023 on their goods and services. They must also update their systems and price displays to show the new GST rates.

Key Takeaways

  • GST is an indirect tax on goods and services mostly sold for human consumption.
  • Singapore’s GST rate increased from 7% to 8% as of 1st January 2023.
  • The revenue collected from the increased GST will support seniors and healthcare.

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