Goods and Service Tax (GST)
In Singapore, Goods and Service Tax (GST) is a kind of consumption tax that’s levied on imported commodities that are collected by its customs agency. This is a broad-based tax that involves nearly all supplies that are found in the country. In other governments, GST is known as Value-Added Tax (VAT) and in Singapore, the rate is 7 percent.
Business entities in Singapore are mandated by the government to register for Goods and Service Tax in cases where their annual taxable revenue exceeds the SGD 1 million limit. If their present-day taxable income as well as annual taxable income is more than SGD 1 million, they need to register for GST within a month (30 days) from the time it’s presumed liable.
Charging as well as collecting GST
After registering for Goods and Service Tax, entities need to charge the said tax on their supplies and utilise government-approved rates in the process. This particular kind of GST is charged as well as collected and is known as output tax. They need to be paid to the Inland Revenue Authority of Singapore (IRAS) and failure to do this may lead to fines as well as other penalties.
To add, the Goods and Service Tax that incurred on business procurements as well as expenses (including imported goods) is known as input tax. If a particular entity conforms the conditions for input tax claims, it can claim the input tax on business expenses as well as purchases.
In order to grant relief from GST, certain schemes have been put in place:
- Bad debt relief
- A bad debt situation takes place when a specific amount that’s owed is not recovered. Affected parties can apply relief for the said situation in an effort to recover the output tax that was previously accounted for and therefore paid.
- Second hand goods scheme
Under this particular scheme, the Goods and Services Tax is payable only on the margin difference of the purchase as well as sale price of second hand commodities.
- Import relief
This particular scheme stipulates that goods that are imported by parcel posts (except for dutiable products) are exempted from GST when the cost of insurance and freight (CIF) does not exceed SGD 400. However, if it’s more than the said amount, the whole sum is subject to GST.
- Major exporters scheme
Under major exporters scheme guidelines, business entities are mandated by the government to settle the GST of goods that are imported to Singapore via the government customs body and in the process, subsequently obtain a refund from the IRAS after the submission of Goods and Service Tax returns.
- Bonded warehouse scheme
The bonded warehouse or zero-GST warehouse scheme is a designated area that is approved by the government via Singapore Customs for storing imported as well as non-dutiable goods while the GST is suspended.
- Approved third party logistics company scheme
The approved third party logistics or 3PL company scheme is specifically designed to boost the competitiveness of entities that provide logistics management services to clients that are based overseas and utilise Singapore as their logistics hub.
- Approved marine fuel trader scheme
According to the Marine Fuel Trader (MFT) scheme, approved business entities are not required to pay Good and Service Tax when making local purchases of government-approved marine fuel from GST-registered suppliers.