GST is only charged by GST-registered businesses. A business must register for GST if its annual turnover exceeds S$1 million. For small businesses that do need meet this threshold, GST registration is optional. Unregistered businesses neither have to collect GST nor remit it to the government;
- GST is also levied on the import of goods (in this case it is collected by Singapore Customs);
- Certain goods and services are exempt from the scope of GST; for instance, the provision of most financial services, the sale and lease of residential properties, and the importation and local supply of investment-oriented precious metals;
- Goods exported and services offered to overseas clients are exempt from the GST tax which means that no tax is charged on them;
- A GST registered business can claim credit for the GST that it has paid for its inputs (called Input Tax) and offset it against the GST that it has collected from its customers (called Output Tax) when calculating the GST tax amount due from the business to tax authorities. Thus, the business only pays GST tax to the authorities on the amount of “value it adds” to its products.
When Singapore first introduced GST in 1994, the rate of this tax was 3%. In 2003 and 2004, the government increased the rate of GST to 4% and 5% respectively. Since 2007, the rate of GST has been 7%.
The sections below provide more detailed information about various aspects of Singapore GST.
GST Applicability
GST is NOT applicable to all transactions of goods and services. It’s applicable under the following two cases:
Case 1 – Supply of Goods and Services
- Supply is made by a GST-registered business or a business liable to register for GST; and
- Supply comes under the scope of GST i.e. GST is applicable to the supply; and
- Supply is received in Singapore; and
- The purpose of the supply is for the furtherance of a business of the taxable person. This implies that the tax is not applicable in the case of personal transactions of the supplier.
Under this case, the business supplying the good or service is responsible for charging GST (on behalf of the government) and in turn paying it to the government by filing periodic GST tax returns.
The term ‘supply’ in general has the following meaning for GST purposes:
- A supply is anything provided for a “consideration” in return. For instance, a petrol station providing petrol to its customers is a “supply of goods” because the petrol station receives money as consideration for the petrol that it provides.
- GST will be applicable only when the “place of supply” is Singapore. This means the physical location of the goods must be in Singapore when transferring the ownership of the goods. For instance, if a company in Singapore sells goods to an overseas company, but the ownership of the goods is transferred in Singapore to a customer of the overseas company, then in such a situation the GST will be applicable.
Case 2 – Import of Goods and Services
All goods imported into Singapore are subject to GST. When goods are imported, the tax is paid on the Value of Import. The Value of import will include any custom duty payable and the Cost, Insurance, and Freight (CIF) etc. The GST on the import is charged by the Singapore Customs.
Singapore tax authorities have provided the following example to compute the value of import and the GST applicable:
| Cost of Goods | $10,000 |
| Insurance and Freight | $2,000 |
| CIF Value | $12,000 |
| Customs Duty | $3,600 |
| Value of Import | $15,600 |
| GST @ 7% | $1,092 |
|---|
Exempt & Zero-Rated Supplies
In Singapore there are three types of supplies where GST is not applicable:
Type 1 – Exempt Supply
The Fourth Schedule of the GST Act exempts certain goods and services from GST. These include:
- Provision of financial services, (example: issue/sale of shares).
- Importation as well as the local supply of precious metals.
- Sale and lease of residential properties.
Type 2 – Out-of-scope Supply
Supply of goods and services that take place outside of Singapore are outside the scope of the GST Act and are not taxable. To prove that the transaction occurred overseas, and not in Singapore, you will have to maintain certain documents.
Type 3 – Zero-rated Supply
GST is charged at the rate of 0% (hence the term ‘zero-rated’) to the supply of:
- Goods that are exported, and
- Supply of services to foreign-based clients.
The principal applicable in the case of zero-rated supplies is that at the point of supply you must ensure that the goods you are supplying are being exported and that you have the documents to prove that the goods are being exported. However, you can still claim input tax deduction on the GST tax you paid for any inputs that were used in producing the zero-rated goods or services.