Demystifying GST Policies for Singapore-Based Companies

Goods and Services Tax (GST) is an integral part of Singapore’s taxation system, aimed at generating revenue for the government while ensuring a fair and efficient taxation process.

If you run a company in Singapore, understanding the GST policies is crucial to remain compliant with the law.

In this article, we will delve into the key aspects of the GST system for Singapore-based companies, covering registration, payment, and potential penalties for non-compliance.

What is the GST system in Singapore?

The Goods and Services Tax (GST) in Singapore is a consumption tax levied on the supply of goods and services. As of writing, the standard GST rate is 8%. This means that consumers pay an additional 8% on top of the purchase price for most goods and services.

The GST system in Singapore operates on a self-assessment basis, meaning businesses are responsible for assessing their own GST liability, filing GST returns, and making payments to the tax authorities.

What is a GST registered company?

A GST registered company is a business entity that is required to charge and collect GST from its customers on taxable goods and services. Companies with an annual turnover exceeding S$1 million are required to register for GST.

However, companies with a turnover below this threshold can also voluntarily register for GST to claim input tax credits on their purchases.

GST registration provides businesses with the authority to collect GST from their customers, but it also entails certain responsibilities, such as filing GST returns and maintaining proper records.

Does my company need to pay GST?

If your company is GST registered, you are required to charge GST on your taxable supplies. Taxable supplies refer to goods and services that are subject to GST at the prevailing rate. As a GST-registered company, you must collect the GST amount from your customers and hold it in trust for the Singaporean government.

However, not all supplies are subject to GST.

Some goods and services, such as basic food items, residential properties, and financial services, are exempted from GST. It is essential to identify which supplies are taxable and which are not to remain compliant with GST policies.

What do I need to do when paying GST?

When paying GST, there are several steps your company needs to follow:

Charge GST
As a GST-registered company, ensure that you charge GST on all taxable supplies made to your customers. The GST amount should be clearly indicated on your invoices.
File GST Returns
Companies are required to file GST returns periodically, usually on a quarterly basis. These returns summarize the GST collected and paid during the period. Accurate and timely filing of GST returns is crucial to avoid penalties.
Settle GST Liability
After filing your GST returns, you must pay the net amount of GST collected to the Singaporean tax authorities. This is done either through GIRO (General Interbank Recurring Order) or other approved payment methods.
Maintain Proper Records
It is essential to keep detailed records of all transactions, GST invoices, and relevant financial documents for at least five years. These records will be crucial for GST audits and compliance checks.

What are the penalties for not paying GST?

Failure to comply with GST policies can lead to penalties and fines. The common penalties for not paying GST include:

Late Filing Penalties: If your company fails to submit GST returns on time, you may be subject to late filing penalties, which are typically a percentage of the tax amount owed.
Late Payment Penalties: If your company does not settle its GST liability by the due date, late payment penalties, typically in the form of a percentage of the outstanding tax, may apply.
Non-Registration Penalties: Operating as a GST-registered company without proper registration or failing to register when required can result in significant fines and legal consequences.
Tax Evasion Offenses: Intentional tax evasion or fraudulent activities related to GST can lead to severe penalties, including hefty fines and possible imprisonment.