Planning to run your own business? Not sure which necessities require GST input? In Singapore, GST registration is necessary for companies with a taxable turnover exceeding $1million.
Nonetheless, businesses can also apply for voluntary GST registration without meeting the threshold. This will allow your company to claim input tax credit (ITC) and enjoy various other benefits.
Before diving into the world of business ownership, it is important to understand when GST applies and what it should be levied on:
Taxable Supplies
As of 2024, the standard rate of supplies stands at 9% GST. These supplies refer to goods and services that need to be taxed accordingly. There are also zero-rated supplies at 0% GST, mainly for the export of goods and international services.
- Goods Liable for 9% GST Input: Any tangible goods sold within Singapore are subject to GST. This includes anything from retailed goods to food and beverages. The scope of taxable goods is broad so it is important to ensure proper registration and compliance.
Failure to do so may lead to penalties or tax audits by IRAS.
- Services Liable for 9% GST Input: Most services provided in Singapore are subject to GST. This includes commercial establishments, firms, digital platforms and more. Any service that is consumed within Singapore generally falls under this.
Even subscription-based digital services like streaming platforms and cloud storage are included.
- Zero Rated Supplies (0% GST Input): Certain transactions qualify for zero-rated GST (0%). This mainly applies to the export of goods and the provision of international services. These businesses do not need to charge GST, but can still claim input tax.
This will be beneficial for companies engaged in global trade and cross-border services. Not to mention helps businesses stay competitive in global markets while reducing their overall tax burden.
Non-Taxable Supplies
Non-taxable supplies refer to goods and services that do not need GST. These supplies have been exempted from GST’s under Singapore’s tax regulations. There are also out-of-scope supplies that fall outside the GST system.
- Goods: Any sale or rental of unfurnished real estate is exempted from GST. This applies to HDB flats, private condominiums and landed properties meant for residential use.
The import and local supply of precious metals are also exempt from GST, but only if they meet Singapore’s Investment Precious Metals (IPM) criteria. This means your precious metals need to have a specific level of purity.
- Services: Most financial services are exempted from GST. Institutions such banks, insurance companies and stock brokers do not charge GST on transactions that fall under the GST Act. This includes loans, sales of shares, exchange of currency and more.
The exchange, loan and use of digital payment tokens such as cryptocurrency, are also exempted from GST.
- Out-Of-Scope Supplies: Out-of-scope supplies refer to transactions that fall outside of Singapore’s GST system. These supplies are not subject to GST and do not need to be reported in GST returns.
Out-of-scope supplies include private transactions and business dealings that happen outside of Singapore. This includes sales where goods are delivered from overseas to another country.
Claiming GST Input
Understanding how to claim GST input is crucial.The Input Tax Credit (ITC) allows GST-registered businesses to claim the GST paid on business-related purchases. This can help you maximise tax benefits while maintaining GST compliance.
However, businesses must ensure they meet the eligibility criteria and maintain proper GST invoicing and record-keeping. To claim input tax, purchases must be related to taxable supplies. This includes goods and services used in business operations, resale or manufacturing.
The following conditions must be met:
- Valid Tax Invoice: A proper GST invoice issued by a GST-registered supplier must be retained.
- Business Use: Purchases must be for business purposes and not for personal consumption.
- GST-Registered Supplier: The vendor must be GST-registered in Singapore.
Timeframe for Claims: Claims must be made within five years from the date of the invoice.
Restrictions on GSt Input Claims
Not all business-related expenses qualify for GST input tax claims. The Inland Revenue Authority of Singapore (IRAS) has outlined restrictions on non-claimable input tax. This includes:
- Club Membership Fees: Membership fees for gyms, golf clubs and social clubs are non-claimable.
- Personal & Entertainment Expenses: Employee benefits such as corporate gifts, recreational activities and entertainment expenses for non-business purposes are restricted.
- Non-GST Registered Suppliers: GST cannot be claimed on purchases from vendors who are not GST-registered.
Motor Vehicles: Unless used for commercial transport (e.g., taxis, rental cars, or buses), GST on motor vehicles is not claimable.
Simplify Your GST Registration With PLCO
According to IRAS, over 3000 businesses are randomly selected for audit every year. The result; more than $18,000 in penalties on average! The main cause? A lack of understanding, leading to common errors that offset their GST input tax claims.
To avoid the same predicament, it is important to understand the A-Z’s of GST registration. Even better yet, just to leave it to the professionals! We will complete your GST registration, ensure compliance and help you claim eligible GST input tax effortlessly.
Get in touch today and contact us to find out more!
