Navigating the 2024 GST Rate Adjustment
The Inland Revenue Authority of Singapore (IRAS) has recently issued an informative e-tax guide tailored explicitly for businesses registered under the Goods and Services Tax (GST) system. This comprehensive guide focuses on the anticipated GST rate change scheduled for 2024. The announcement made in Budget 2022 highlighted the incremental increase of the GST rate from 8% to 9%, set to take effect on 1 January 2024.
In budget 2022, the Singapore Minister for Finance announced that the GST rate would be increased over a two-year time frame as follow:
- Increase from 7% to 8% with effect from 1 January 2023, and
- Increase from 8% to 9% with effect from 1 January 2024
The e-tax guide provides comprehensive coverage of various important topics. These include the requirements for displaying prices, excluding hotels and food and beverage establishments that implement service charges. It also encompasses the GST transitional rules to ensure a smooth transition for businesses.
Additionally, the guide outlines a 90-day grace period for issuing credit notes or canceling and reissuing invoices in cases of overcharged GST without any extensions granted. It delves into considerations regarding customer exchanges, the associated GST implications, and the obligations and guidelines pertaining to reverse charge supplies. The guide also addresses the transitional rules applicable to imported digital services, non-digital services, and low-value goods falling under the Overseas Vendor Registration (OVR) regime.
Moreover, it specifies the treatment of deduction and credit card payments received through the General Interbank Recurring Order (GIRO) in January 2024, treating them as payments received before 1 January 2024. Finally, the guide offers illustrative examples highlighting the impact of the GST rate change and providing valuable guidance on business preparatory measures.
What is the purpose of GST in Singapore?
The increase in the GST rate aims to generate revenue for the government and to support public spending on various sectors such as healthcare, education, infrastructure, defense, and social services. GST helps Singapore maintain a stable and sustainable fiscal system by diversifying the government’s sources of revenue beyond direct taxation. It is also designed to promote fairness and equity by taxing consumption instead of income, allowing individuals and businesses with higher spending patterns to contribute more to the tax revenue.
Which businesses are affected by this change?
GST-registered business
Businesses based in Singapore with an annual turnover exceeding S$1 million (US$742,000) must register for GST and charge GST on all their taxable supplies. GST-registered businesses are required to collect GST from their customers on behalf of the Singapore government and file regular GST returns.
In Singapore, there are several common types of businesses that typically register for Goods and Services Tax (GST). These include retailers, such as supermarkets, clothing stores, and electronics shops, who sell goods directly to consumers. Restaurants, cafes, food stalls, and catering services in the food and beverage industry also tend to be GST-registered.
Professional service providers like accountants, lawyers, architects, consultants, and IT service providers often fall under the GST registration requirement. Wholesale and distribution businesses involved in activities like importing, exporting, and distributing goods are commonly registered for GST. Manufacturing companies engaged in producing goods for sale, such as electronics manufacturers,pharmaceutical companies, and food processing plants, are typically GST-registered.
Additionally, construction and engineering businesses, healthcare services including clinics, hospitals, and dental practices, and educational service providers like private education institutions and training centers usually register for GST.
While most financial services are exempt from GST, certain providers like insurance agents and brokers may still need to register. Lastly, with the growth of e-commerce, many online businesses, including online retailers, digital service providers, and marketplace operators, are also required to be GST-registered.
Taxable supplies
This term refers to the sales or purchases of goods or services subject to the standard rate of GST. In Singapore, taxable supplies refer to goods and services subject to Goods and Services Tax (GST), the local equivalent of value-added tax (VAT) in other countries. GST is currently set at a standard rate of 7% in Singapore.
Taxable supplies encompass a range of transactions that are subject to taxation. Firstly, the sale, transfer, or disposal of physical goods falls under this category and is typically subject to GST. This pertains to a variety of items, including electronics, furniture, clothing, and vehicles. Secondly, the provision of services in exchange for a fee or other forms of compensation is generally taxable. This includes services such as consultancy, legal assistance, accounting, and advertising. Thirdly, when goods are imported into Singapore, they are usually subject to GST, unless specific exemptions apply or they fall under the GST Import Relief scheme.
Additionally, as of 1 January 2020, overseas suppliers who offer digital services to customers in Singapore are required to charge GST. Examples of such digital services include online streaming of movies, music, games, software services, and electronic publications. Lastly, the lease or rental of both commercial and residential properties is generally subject to GST.
It’s important to note that some supplies, such as financial services, residential properties, and the sale and lease of certain investment precious metals, are exempt from GST. Additionally, certain supplies may qualify for zero-rated GST, such as the export of goods and international services.
Conclusion
In conclusion, the recent e-tax guide issued by the Inland Revenue Authority of Singapore (IRAS) provides valuable information and guidance for businesses registered under the Goods and Services Tax (GST) system. The guide focuses on the anticipated GST rate change scheduled for 2024, which will see an incremental increase from 8% to 9% starting from 1 January 2024.
If you have any questions or require the most accurate and up-to-date information on any new GST policies or changes in Singapore, Contact us today and let our experienced professionals provide you with the guidance and support you need to stay informed and make the right decisions for your business.