Goods and Service Tax in Singapore

Goods and Services Tax (GST) is a consumption tax and is thus a tax on consumer spending. It is collected by GST-registered businesses on supplies of goods and services to their customers. Generally, each business in the chain of supply from manufacturer through to retailer charges GST on their sales and is entitled to deduct from this amount the GST that it paid on its purchases. Thus, each business in effect charges GST only on the value that it adds to the good or service.

GST is one of the four pillars of the overall tax structure of Singapore. The other three include personal tax, corporate tax, and property tax. The current GST rate stands at 7%. This article provides a detailed guide to GST from a Singapore business owner’s point of view.

What GST Subjected?

All goods and services are taxable and known as taxable supplies. However, some items are specifically exempt from GST by law.

Who are all can register GST?

• Sole proprietorships
• Partnerships
• Limited Liability partnerships
  Companies
• Clubs, associations, management corporations or organizations
• Non-profit organizations
• Statutory boards
• Government bodies

GST Applicability

GST is NOT applicable to all transactions of goods and services. It’s applicable under the following two categories:

Category 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.

Category 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.

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:

1- Goods that are exported, and

2- 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.