In 2024, Singapore's GST will be raised to 9%, what will be the impact on GST registered and unregistered enterprises, and how should enterprises respond?
1. GST raised to 9%
In response to the increasing social spending such as an ageing population and healthcare, consumers will be required to pay a 9% GST on goods or services purchased from a GST-registered company from 1 January 2024. This means that for every S$100 spent, you have to pay an extra S$1 in tax.
Businesses should charge the correct consumption tax rate based on the situation of sales, the timing of delivery of goods or services, and the timing of payment. In Singapore, GST, also known as Goods and Services Tax (GST), covers a wide range of goods, including imported goods (collected by Singapore Customs) and almost all goods and services provided in Singapore.
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2. Which companies are affected?
Singapore requires businesses to register for Goods and Services Tax (GST) if they:
1. If the company's turnover of taxable goods and services for the current year exceeds S$1 million or is estimated to exceed S$1 million, it must register for GST within 30 days of fulfilling the obligation;
2. If your business does not have a turnover of S$1 million in taxable goods and services, you can decide whether you want to register for GST or not.
3. If the majority of the goods or services are mainly exported, or zero-rated supplies to the world, there is no need to register for GST.
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3. Impact on GST registered enterprises
1. Businesses need to prepare in advance to ensure a smooth transition to the new GST on their accounting systems, retail point-of-sale terminals and ancillary software. For example, you might need to modify point-of-sale, invoicing, accounting, and other systems, as well as price displays, to reflect the new rates.
2. Enterprises should charge the correct consumption tax rate according to different sales conditions, delivery of goods or completion of services, and time of payment.
3. To ensure that the price is fair and reasonable. Singapore emphasised the need for companies to be transparent in communicating the reasons for price increases to consumers. The main reasons for the price increase should be clearly explained, and the GST increase should not be the sole reason. Unreasonable price increases may be heavily regulated.
4. Comply with the price labeling regulations. Singapore requires companies to clearly mark the price of goods with the new GST on all prices displayed to the public (e.g. price tags, price lists, advertisements, brochures, websites) to ensure that the price that consumers see is the final selling price. Businesses that violate the rules may face fines, so it's important to make sure that your price is displayed legally and compliantly.
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4. For non-GST registered enterprises
The cost of goods and services purchased from GST-registered suppliers may increase after the tax rate increases. To alleviate the increased cost of doing business due to the GST increase, businesses that are not registered for GST may wish to apply for GST registration on a voluntary basis in order to recover the GST incurred as a result of their expenses. As businesses that voluntarily register must remain registered for two years, businesses should carefully weigh the pros and cons before deciding to apply for GST registration.
Non-GST registered businesses should also be aware of the additional compliance costs associated with the GST rate change if they decide to voluntarily register for GST until 1 January 2024. If your business cannot afford the additional compliance costs incurred due to the change in the tax rate, it should remain unregistered for GST or postpone its GST registration until or after 1 January 2024.
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5. How should enterprises respond?
1. Preparation list for consumption tax registered enterprises
Update accounting and invoicing systems.
Update cash registers and receipt systems.
Comply with the price display requirements set out in the 2024 GST Change Guide.
Train employees on transitional rules for rate change and applying the correct tax rate for sales transactions within the date range of the tax rate change.
Review contracts/agreements to determine the excise tax rate to be charged or borne by each party.
Inform customers about the precautions regarding the GST increase. For example, it is stated in advertisements, websites and brochures that GST will be charged at the applicable tax rate at the time of supply.
If your business is primarily involved in imports and exports, consider applying for the Major Exporter Scheme to ease your cash flow for importing and exporting goods significantly.
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2. Impact of non-GST registered enterprises:
Considerations for Voluntary GST Registration:
Responsibilities and associated costs of becoming a GST registered company.
Supplier status: Whether it is a GST registered company.
Customer status: Whether it is necessary to absorb the cost of consumption tax.
Type of sales of the company: e.g., zero excise tax.
If you want to consult GST questions, please contact Chuhaibao, we will assess and formulate a financial and tax solution for you.
Note: The data is from the official website of IRAS Singapore.