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GST is an abbreviation for Goods and Services Tax. This is a form of Value Added Tax (VAT) which is levied on the goods and services supplied by a particular business. GST was implemented in the year 1994, by following the models of the United Kingdom VAT law and the GST law present in New Zealand.
GST is considered as value-added tax in other jurisdictions. GST is a form of indirect tax or a consumption tax which is directly levied on the supply of services and goods provided in Singapore. Apart from this, GST registration in Singapore would be mandatory for any business that imports any form of products into Singapore.
GST is levied on the products and services which are produced in Singapore. Businesses that import products in Singapore would also have to pay some form of GST. Hence it is crucial to understand the significance of GST registration in Singapore.
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Some of the main objectives of GST registration in Singapore are:
The primary regulatory authority for GST registration in Singapore is the Inland Revenue Authority of Singapore (IRAS). This organisation controls and administers all the GST collection processes and procedures in Singapore. Hence a business must register themselves with the IRAS.
Apart from this, the IRAS would also look into any form of disputes or appeals arising out of GST matters. The IRAS also help in settling different form of disputes related to GST registration in Singapore.
Introducing such tax is one of the most remarkable steps by the IRAS as it removes any form of additional burdens on personal and corporate income. Through this, the Government of Singapore can aim a steady revenue growth and also limit the amount of income tax paid by individuals and other forms of business entities.
Currently, the rate of GST in Singapore is 7%. It is an indirect tax which is levied on the goods and services manufactured in Singapore. GST would apply to the sale price of goods and services in Singapore. Hence to calculate GST, the business would have to apply it on the respective selling price.
GST follows a particular structure for being taxed to the end consumer. The revenue authorities of Singapore first introduce GST. After this, it is levied on the sale price of the products and services offered to the end customer. At the end of the GST structure, the end customer would be the individual or entity paying GST.
Hence, from the above, it can be understood that entities and businesses that go for GST registration in Singapore are not burdened by payment of GST. These entities merely act as facilitators and agents for the proper collection of GST.
If a business is registered in Singapore to pay GST, then the same has to be collected from the customers. The end customers pay the amount of GST, which is levied on the products and services provided by the business. The GST registered business or entity then pays this tax to revenue authorities in Singapore.
For example, if you charge SGD 200 to your customer for products and services, then you must invoice SGD 214 for the products and services rendered to the end customer.
The amount which is directly invoiced to the customer must be payable to the revenue authorities of Singapore (IRAS). This must be compulsorily paid every quarter, i.e. every three months in a year. This invoice amount can be paid through the GST filing system, which is an online system for making payments related to GST.
Any company which is established has to apply to the IRAS for GST registration in Singapore. Just by incorporating under the relevant Company laws of Singapore, a company does not receive any automatic status for GST registration. Hence a company would have to register with the IRAS before they can charge any amount of GST.
GST registration in Singapore is mandatory for all businesses in Singapore. However, there are specific criteria for a business to be registered under the relevant GST legislation. First and foremost, the payment of GST by a particular business would be determined on the amount of revenue generated by the business entity.
Hence it is clear that the payment of GST in Singapore would be based on the revenues earned by the business. Businesses would have to determine whether or not they are required to pay GST. From the above, it is clear that the payment of GST by a particular business would have to be continually assessed by the business.
Under the process of GST registration in Singapore, there are two forms of registration.
The following are the types of GST registration in Singapore:
Voluntary Registration- Under the process of voluntary registration, a business would have to carry out a self-assessment tax for the business entity. Based on the revenues earned by the business, the GST would be charged on the business entity. Any business that does not have the liability to compulsory register under this system can opt for the voluntary registration process. When the business goes in for the voluntary registration process, then there must be prospective plans for the business to carry out sales in Singapore.
The following conditions have to be satisfied with the business for classifying under the voluntary registration of GST in Singapore:
Compulsory Registration- Under this process, every business entity in Singapore would mandatorily require registering.
The following criteria are required for compulsory GST registration in Singapore:
When the revenue of the company exceeds SGD 1 million, then the company would have to register with the relevant authority for paying GST. This must be carried out within 30 days of the revenue exceeding a particular amount.
By carrying out the above procedure, a business can comply with the relevant laws related to GST and avoid any form of penalties imposed by the IRAS.
Usually, all business entities are required to register for charging GST in Singapore. However, if the business entity has a system of making only zero-rated supplies, then such business would be exempted from GST registration.
This would be applicable for the business in case the taxable turnover exceeds the required amount of business registration for the GST perspective.
If any business is exempted from GST registration, then the following criteria have to be sufficed:
If the business follows all this, then it can claim the benefits of exemption of GST registration in Singapore.
Every company has to follow the below process for GST registration in Singapore:
Read our article:Simplified and New GST Returns from April 2020
Varun Hariharan has completed the Legal Practice Course from BPP Law School, Manchester. He has a Masters in Commercial and Corporate Law from the Queen Mary University of London and LLB Honours from Bangor University, UK. He specialises in law related to corporate, artificial intelligence and technology law.
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