Are you a business owner in Singapore? If yes, then this is a topic that you should understand. Being well informed about GST output tax is important.
Why? Because it directly impacts how you manage your sales and the tax you need to pay. But what exactly are supplies applicable for output tax? Let’s break it down.
What is GST Output Tax?
GST, or Goods and Services Tax, is a value-added tax imposed on the sale of goods and services in Singapore. Output tax refers to the GST a business collects from its customers when making taxable supplies.
When you make a sale, you’re required to charge GST on the goods or services you provide. This is known as output tax. The output tax you charge is usually 9% of the sale price, unless stated otherwise.
If you are a GST-registered business, you must declare the output tax collected to the Inland Revenue Authority of Singapore (IRAS).
Read more about GST: Goods and Services Tax (GST): What it is and how it works and Charging GST (Output Tax)
Supplies Subject to Output Tax
Not all types of supplies are liable for GST output tax. To determine which supplies are applicable, you need to understand the different categories of supplies.
- Taxable Supplies
These refer to goods and services on which GST is charged. If you provide a taxable supply, you are required to charge output tax. Most sales of goods or services fall into this category.
- Exempt Supplies
Certain goods and services are exempt from GST. For example, financial services, residential properties, and certain healthcare services. If your business makes exempt supplies, you do not charge GST on them, nor do you collect output tax from customers.
- Zero-Rated Supplies
Zero-rated supplies are also taxable but have a 0% GST rate. For instance, international exports are zero-rated. This means you do not charge GST on these supplies, but you can still claim back any GST you paid on related expenses.
- Out-of-Scope Supplies
These are supplies that are completely outside the scope of GST. They include things like sales of goods that don’t qualify as taxable goods, or activities that are not related to your business.
Identifying Goods and Services for Output Tax
When determining which goods and services are subject to output tax, consider the following:
- Sale of Goods
If you sell tangible goods in Singapore, output tax generally applies. This includes products you sell to customers for business purposes, such as retail sales.
Example: A bookstore selling physical books to customers must charge GST on the sale.
- Provision of Services
Services offered in exchange for payment are usually taxable. This can include consultancy, legal services, or digital products like software.
Example: A legal firm charging clients for legal consultation must apply GST to its service fees.
- Export Goods
If you export goods from Singapore, they are typically zero-rated for GST. This means you do not charge GST on the sale, but you can still claim input tax on related expenses.
Example: A manufacturer shipping electronics to overseas customers charges 0% GST but can reclaim the GST paid on materials used to produce these goods.
- Transfer of Business Assets
If you transfer or dispose of any business assets, like equipment or property, output tax may apply, depending on whether the goods are taxable or exempt.
Example: A business selling off used office furniture must check if the items are taxable and apply output tax if required.
When Should a Business Register for GST?
To determine if your business needs to charge GST output tax, you must first check whether GST registration is required. In Singapore, businesses must register for GST if:
- Their taxable turnover exceeds S$1 million in the past 12 months, or
- They expected taxable turnover to exceed S$1 million in the next 12 months.
If your business meets either of these conditions, you are required to register for GST and begin charging output tax on taxable supplies.
Read more about compulsory GST registration: What is compulsory registration under GST in Singapore?
However, even if you do not meet the threshold, voluntary GST registration is an option. Voluntary registration may benefit businesses that frequently incur GST on purchases, as it allows input tax claims.
Read more about voluntary GST registration: What is voluntary registration under gst?
Is your business not registered for GST yet? Do not worry! Help is just a call away. Contact us at (65) 6932 5055, and we will assist you with your GST registration in no time.
Read more about why GST registration matters: What are the benefits of GST Registration in Singapore?
Types of GST Schemes for Businesses
Singapore offers several GST schemes that can affect output tax obligations. These schemes are designed to simplify tax processes and ease cash flow.
This scheme is suitable for businesses that import goods for export. Under MES, you do not pay GST on goods imported into Singapore if they are meant for export. This reduces the need to handle large output tax payments upfront.
Businesses that cater to tourists can benefit from the TRS. It allows GST refunds for tourists purchasing goods in Singapore. If your business participates in TRS, you still charge output tax but facilitate refunds for eligible customers.
IGDS helps businesses defer GST on imports until the filing of their GST return. This scheme improves cash flow by postponing the payment of import GST.
By using these schemes, businesses can better manage cash flow while ensuring compliance with GST output tax regulations.
Claiming Input Tax
One important thing to note is the relationship between output tax and input tax. As a GST-registered business, you can claim input tax on business expenses related to taxable supplies. Input tax refers to the GST you pay on the goods and services your business purchases.
However, when you sell products or services subject to output tax, you must pay the GST output tax on those sales. If you are in a situation where you are collecting more GST on your sales than what you paid on purchases, you will need to remit the difference to the IRAS.
Need any help with matters relating to GST? Contact us today at (65) 6932 5055 or send an email to enquiry@plco.com.sg for assistance! We will be here whenever you need us.
Special Considerations
There are some special cases that require extra attention:
- Mixed Supplies
If your business provides both taxable and exempt supplies, you must apportion the output tax. This is to ensure that you’re only charging GST on the taxable supplies.
- Imports
Imported goods are also subject to GST input tax. If you import goods into Singapore, you’ll pay GST when the goods are cleared through customs. This GST is treated as input tax and must be declared in your GST filings.
- GST Exemptions
Some businesses may qualify for exemptions based on their activities. For example, financial institutions may be exempt from charging GST on certain services. Be sure to check the guidelines set by IRAS to ensure your business is complying with GST laws.
GST Filing and Reporting
If your business is registered for GST, you are required to submit GST returns regularly. This involves reporting both output tax collected on sales and input tax paid on purchases. The net amount (output tax minus input tax) must be paid to the IRAS.
IRAS has set filing periods based on your business’s GST registration status. The returns must be filed within one month from the end of your GST accounting period.
Why Getting Output Tax Right Matters
Getting your output tax right is vital for several reasons:
- Avoid Penalties
Incorrect reporting can lead to fines or penalties from the IRAS.
- Accurate Financial Records
Properly determining which supplies are taxable ensures your business’s finances are accurately recorded.
- Cost Control
Understanding output tax helps you manage your cash flow by knowing when and how much to remit to the authorities.
Final Thoughts on Determining GST Output Tax
Determining the supplies applicable for output tax in Singapore isn’t complicated. But, it does require attention to detail. Taxable supplies are the core area to focus on, while exempt, zero-rated, and out-of-scope supplies may not require output tax collection.
Always stay updated with the IRAS guidelines and ensure your business is compliant with GST requirements. By doing so, you avoid costly mistakes and ensure smooth operations for your business.
With the right approach, your business will be on track to handle GST output tax efficiently, keeping both your operations and tax filings in good order.
If you are unsure, Peter Leow Consulting is here to guide you through the process. We are always reachable at (65) 6932 5055 or send an email to enquiry@plco.com.sg.
To learn more about what Peter Leow Consulting has to offer, visit our website!
