Singapore is a global business hub that attracts many investors. Businessmen and entrepreneurs from all over the world flock over to dabble in this business-friendly territory. In the pursuit of success, one regulatory aspect must be considered; Taxes.
More specifically, Goods and Services Tax (GST). GST registration is compulsory for all companies with a taxable turnover that exceeds $1million. Businesses that earn below a million are also eligible for voluntary GST registration.
But what are the benefits of GST registration in Singapore?
What is GST?
First off, let’s take a look at what GST actually is. GST is an indirect tax that must be paid on the consumption of goods and services, including imports. Some supplies like financial services, digital payment tokens and residential properties have GST exemptions.
The current GST rate in Singapore is 9%. When it comes to businesses, GST must also be paid (input tax) and charged (output tax). This output will be paid to the tax authorities to support public spending in healthcare, education and security.
Keep in mind that there are two types of registration:
- Compulsory Registration
There are two bases when it comes to compulsory registration; retrospective and prospective basis. A retrospective basis is determined by the taxable turnover of the business over the past 12 months.
On the other hand, a prospective basis looks at the expected taxable turnover for the next 12 months. A GST registration is mandatory if the turnover exceeds or is expected to exceed $1million.
- Voluntary Registration
Businesses that do not meet the criteria of compulsory registration can opt for voluntary GST registration. This can be advantageous for businesses looking to capitalise on the benefits of GST registration.
GST Registration Process
According to the IRAS, the GST registration process is relatively straightforward. Here’s a brief overview:
Step 1 – Determine Type of Registration: Businesses must determine if they meet the eligibility for compulsory or voluntary registration.
Step 2 – Complete E-Learning Course: The course is designed to help businesses understand GST regulations, filing requirements and compliance procedures.
Step 3 – Submit Your Application: Gather all the necessary information and details about your business and proceed to the application process.
Step 4 – Processing Period: Your application may be selected for audit review, resulting in a longer processing time.
Step 5 – Await Approval: You will receive your GST registration number once your application has been approved. You will also receive a notification date on when you must start charging and collecting GST.
The Benefits of GST Registration
- Credibility and Professionalism
GST registration lends credibility to your business. It signifies that your company is legitimate and compliant with Singaporean tax regulations. This can enhance your reputation among customers, suppliers, and other stakeholders.
Ultimately, this can portray your business as reliable and professional.
- Input Tax Credit
One of the significant benefits of GST registration is the ability to claim input tax credit. Registered businesses can offset the GST they pay on purchases (input tax) against the GST they collect on sales (output tax).
This can result in significant cost savings and improved cash flow management for your business.
- Competitive Pricing
By registering for GST, your business can maintain competitive pricing. Since GST is a consumption tax, it is ultimately borne by the end consumer. Registered businesses can spread the GST burden across their goods and services.
This ensures that prices remain competitive compared to non-registered competitors.
- Access to International Markets
GST registration may be necessary for businesses looking to expand into international markets. Many countries require businesses to have a GST registration to engage in cross-border trade.
By being GST registered in Singapore, your business can facilitate smoother export and import processes. This eliminates potential barriers to entry in foreign markets.
- Legal Compliance
Compliance with tax regulations is crucial for avoiding penalties and legal issues. GST registration ensures that your business remains compliant with Singaporean tax laws.
This can provide peace of mind and mitigate the risk of facing fines or legal consequences due to non-compliance.
- Improved Business Efficiency
Registering for GST necessitates proper record-keeping and accounting practices. This can lead to improved business efficiency as you maintain accurate financial records and filing requirements.
Additionally, the GST registration process may prompt you to review your business operations. This can also lead to improvement and smoother operations.
- Potential Business Growth
GST registration may open doors to various opportunities for business growth. It can signal to potential investors, partners and customers that your business is serious about its operations and expansion plans.
Moreover, access to input tax credits can free up resources that can be reinvested into the business for further development and growth.
Conclusion
GST registration is not a burden but an ally to your business operations. It is important to familiarise yourself with its applications before setting up your business. This will ensure a smooth transition into the GST regime.
Need help with your GST registration? Contact us to find out more!
