GST Singapore 2023 Rate Change Comprehensive Guide

During Budget 2022, Singapore Government released the news regarding the rate increase of GST Singapore 2023. Let us take a look at how it impact businesses and how should we prepare for it.

‍

What is GST?

The Goods and Service Tax, GST, is a broad type of taxation that is applied to imported goods that are taxable. The name GST Singapore refers to this Goods and Services Tax in Singapore. In other regions, people referred to it as "Value Added Tax" (VAT).

This tax makes it possible for you to provide goods at cheaper prices while still maintaining profits. The government requires you to register for GST if you make over $1 million annually. For small-scale businesses, it is voluntary.

‍

Benefits of registering your Business for GST

There are several benefits that you can get if you register for GST Singapore. The benefits are:

Increased credibility

With GST registration, you’re more likely to attract more business. This is because people assume you generate high revenue. This makes them feel confident in doing business with you and referring you to other people.

Ability to withstand increases in prices

This tax helps you recover part of the money you have spent making purchases as well as passing down the tax costs to the final consumer. This makes it easier for you to take the hit when prices surge.

Enhanced savings and investment

For businesses that are GST registered, you pay lower rates for other taxes, such as individual tax. In addition, your savings and investment taxes are exempt from taxation, which puts you in a better position to save and invest.

If you are in doubt about registering for GST, check out this article titled "Should I Register My Company for GST?" You will get in-depth insights on the reasons you should register for GST and the process to actually do it.

‍

‍

Overview of GST Rate Changes

What has changed in GST Singapore 2023?

The rate of GST in Singapore is expected to increase from 7 to 8 percent as of January 1, 2023. It was announced during the 2022 state budget that the increment is expected to take effect in two stages.

The second stage will also be by a one percent margin, from eight to nine percent, and will apply from January 1, 2024.

Why is the GST being increased?

The main reason behind the increment is to increase social spending. Social spending accounts for the largest annual expenditure by the Singapore government. This is especially the case for healthcare.

The government anticipates that it will spend more on healthcare in the coming years. This is because a large portion of the country’s population is made up of the aging group. This makes it necessary to provide more healthcare services and build healthcare facilities.

‍

Preparing for GST Rate Changes

How can you prepare for the GST Singapore 2023 Rate Increase?

We recommend that you start making adjustments to your business as early as now. This will help you have a seamless transition when the new rate takes effect.

The Inland Revenue Authority of Singapore (IRAS) has made a publication on how businesses can prepare for the increased rate. Based on IRAS recommendations, here are the ways we believe you can prepare for the GST Singapore changes:

Apply the correct GST rate

Usually, you refer to the rules on time of supply to determine when your supply is being considered as taking place. The GST rate is usually charged at the prevailing rate based on the time of supply rules.

You have to charge GST at a 7% rate if the time of supply is triggered before January 1, 2023. If the time of supply is triggered on or any day after January 1, 2023, then the 8% rate will be applicable.

Reflect the new GST rate during pricing

You have to indicate on products that they are GST-inclusive. Prepare to display the prices on different platforms, including brochures, price lists, price tags, advertisements, and websites.

You must inform the public that the product they are purchasing is subject to the GST.  Communication can also be done verbally, as long as you inform your customers.

If you’re not able to make the adjustments to your price displays before January 1, 2023, you can choose to display two prices:

● Price inclusive of GST at a 7% rate applicable before 1 January 2023

● Price inclusive of GST at 8% rate effective from 1 January 2023

It is important to note that businesses in the hotel and food and beverage industries are not required to display foods that are subject to GST Singapore rules. You must, however, still provide a statement that informs the customers that the prices and services you offer are subject to this taxation.

This exemption is only applicable to those establishments that normally impose a service charge for the goods and services provided.

Update your systems

You should begin, as early as now, making modifications to your system to incorporate the GST rate changes. You can update various systems, including your retail management systems, your accounting systems, your cash register, and your receipting systems.

Depending on the nature and structure of your business, you can manage to make the changes on your own using self-help materials or outsource the tasks. You should therefore consult first to know the suitable approach.

It can be a time-consuming procedure. Thus, to avoid last-minute rushes and penalties, get started on this as soon as possible.

Acquire funding support for pre-approved solutions

The modifications you may have to perform in your business are more than just the price displays and the systems we have mentioned. There is also a list of software compliance requirements that the Inland Revenue Authority of Singapore (IRAS) has provided, and you need to check it out to confirm your operations are within the requirements.

If you’re interested in upgrading your accounting or retail management system, you can apply for the Productivity Solutions Grant. This is a grant that cushions businesses when they make technological advancements in their operations.

Confirm that you’re eligible for the grant first.

Attend Webinars

You should equip yourself with sufficient knowledge of what the increased rate means for your business. Webinars are a good place to start.

The IRAS is organizing live webinar sessions with GST-registered businesses to run until December 2022. You’ll get great insight from these platforms so be sure to join in.

‍

Transitional Rules for GST Singapore 2023 Rate Changes

The Inland Revenue Authority of Singapore (IRAS) published a guideline that explains the supply time transitional rules that apply to the transactions that span over the period of the first-rate change. The transactions include imported services under the Overseas Vendor Registration (OVR) regime and reverse charge supplies.

The transitional rules apply during the following events:

●  When issuing the invoice

●  During receipt of payment

●  The time of delivering goods or providing services

Let’s now consider these events in more detail.

The transitional rules that apply when an invoice is issued on or after January 1, 2023 are:

● When you provide an invoice on or after 1 Jan 2023 for your supplies but full payment is received before the said date, then the supply is subjected to 7% GST. This is regardless of when the Basic Tax Point takes place

● When you issue an invoice and receive full payment on or after January 1, 2023, then the time of supply will be triggered after the rate of change. In this case, the 8% rate is applicable

The transitional rules that apply when an invoice is issued on or before January 1, 2023, are:

● When you issue an invoice for your supply, and you receive full payment or complete delivery of the goods and services on or before said date, the full value of the supply is subject to a 7% rate of GST.

● When you issue an invoice and you receive no or partial payment or you don’t or partially deliver any goods or services, then GST is charged at 7% for what was done before 1 January and 8% for payments and goods or services delivered after

‍

Transitional Rules for Reverse Charge Businesses in GST Singapore 2023

These are rules that are applicable when you acquire imported services. They are also determined by the time the invoice is issued.

The transitional rules that are applicable when an invoice is issued on or after January 1, 2023, are:

● When you issue the invoice on or after the stated date but make full payment before January 1, 2023, a 7% GST is applicable

● If you don’t provide full payment before January 1, 2023 but a part or all services are provided on or before January 1, 2023, the payments and services provided before 1 January are subject to 7% GST and the remaining to 8% GST rate

The transitional rules that are applicable when an invoice is issued on or before January 1, 2023 are:

● When you make full payment or receive full payment, for the entire value of supply, 7% GST is applicable

● For all payments or services delivered after, the 8% GST rate is applicable

‍

Adjustment and Concession for GST Singapore 2023 Rate Changes

Adjustments for GST previously charged

Here’s what you should do if you have issued a credit note on your supply and it’s affected by the increase:

● Reduce the value of your supplies that are standard-rated and output tax in the GST return. This is for the accounting period during which the credit note is issued

● Keep the documents that show the nature and reason behind the adjustment too

Adjustment of contracts on changes in GST

If you had existing contracts before January 1, 2023, you should charge 8% GST on supplies made on or after that date. This adjustment is guided by the terms of the contract, so if it explicitly excludes any change in tax charged or has accounted for the tax change, the new rate will not apply.

GST on discounts and returned goods

This adjustment is applicable if you offer rebates in your business. You should calculate the GST on the rebate using the original rate charged on the sale.

However, if the rebate is used to offset the value of the next sale happening after January 1, 2023, you apply the 8% GST rate to the total value of the sale.

As a good measure, we advise that you maintain documentation that serves as evidence of when exactly the goods were returned.

GST on goods exchanged

If you provided goods or services to your customer and received payment before 1 Jan 2023, you apply a 7% GST rate on the goods returned.

For goods returned on or after January 1, 2023, 8% GST is charged on them. This only applies when you haven’t made any refunds.

‍

GST Singapore 2023 Rate on Imports of Low-Value Goods and B2C Imported Non-Digital Services

As of January 1, 2023, low-value goods (LVG) and imported non-digital services will be subject to GST new rates.

For a good to fall within the LVG category, it should fall within the entry amount of S$400. The sales value of the goods should be applied to determine the entry value of the goods.

Non-digital services are those where the customer is not necessarily located where the service is provided. Examples are online fitness training and educational services.

You should know that the value of sales for LVG is not the same as the value of supply. This is because, for these goods, any amount paid by the client is considered. This includes transport and insurance.

If your business is GST-registered and you purchase LVG or digital services for your business, make sure you provide your GST registration number to the suppliers. You will then not be charged GST at the point of sale.

There are unique transitional rules that apply to this category of goods. You should ensure that you’re familiar with them before the implementation of the new GST rates.

‍

Changes to the Overseas Vendor Registration (OVR) Regime

The OVR basically means the local and foreign suppliers of low-value goods. Currently, the goods considered LVG are not subject to the GST, although all other imports are required to pay GST.

Since January 2020, the OVR regime has only imposed GST on digital services supplied to non-GST registered customers in Singapore.

However, since the finance budget announcement in early 2022, the OVR regime will be extended to cover low-value goods and digital services. The new rates, expected to take effect on January 1, 2023, will require the suppliers of LVG covered under the extended OVR regime to pay the GST.

Other changes you’re expected to make include:

●  Capturing and accounting for GST on the low-value goods in your GST return

●  Gathering your GST-registered customers’ numbers

●  Maintain proper documentation for direct sales of low-value goods to avoid double taxation. This involves important information such as GST registration number and where GST was applied at the point of sale

You should assess if you’re considered an LVG supplier under the extended OVR regime.

‍

Sprout With Us

We understand that this process of adjusting to change can be difficult. We can provide you with professional accountants and secretaries to help you with a smooth transition in your business as the GST rate changes.

Contact us today, and we will definitely help!