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How GST Works

Goods and Services Tax or GST is a broad-based consumption tax levied on the import of goods (collected by Singapore Customs), as well as nearly all supplies of goods and services in Singapore. In other countries, GST is known as the Value-Added Tax or VAT.

GST exemptions apply to the provision of most financial services, the supply of digital payment tokens, the sale and lease of residential properties, and the importation and local supply of investment precious metals. Goods that are exported and international services are zero-rated.

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Taxable and Non-Taxable Goods and Services

The table below lists the categories and types of taxable and non-taxable supplies.

  Taxable Supplies  Non-Taxable Supplies    
 

Standard-Rated Supplies

(GST is charged at 7%) 

Zero-Rated Supplies

(GST is charged at 0%) 

Exempt Supplies

(GST is not applicable) 

Out-of-Scope Supplies

(GST is not applicable)  

 
Goods 

Most local sales fall under this category.

E.g. sale of TV set in a Singapore retail shop

 

Export of goods

E.g. sale of laptop to overseas customer where the laptop is shipped to an overseas address 

Sale and rental of unfurnished residential property 

Importation and local supply of investment precious metals

Sale where goods are delivered from overseas to another place overseas 

Private transactions

See Out-of-scope supplies for more information. 

 
ServicesMost local provision of services fall under this category.

E.g. provision of spa services to a  customer in Singapore

Services that are classified as international services

E.g. air ticket from Singapore to Thailand (international transportation service) 

Financial services

E.g. issue of a debt security

Digital payment tokens (from 1 Jan 2020)

E.g. exchange of Bitcoin for fiat currency

 

 

 

 

 

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Businesses Registered for GST

 

If your annual taxable supplies exceed $1million, it is compulsory for you to register for GST. Otherwise, you may choose to register for GST voluntarily after careful consideration.

 

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Charging and Collecting GST

Once you have registered for GST, you must charge GST on your supplies at the prevailing rate. This GST that is charged and collected is known as output tax. Output tax must be paid to IRAS.

The GST that you incur on business purchases and expenses (including import of goods) is known as input tax. If your business satisfies the  conditions for claiming input tax, you can claim the input tax on your business purchases and expenses.

This input tax credit mechanism ensures that only the value added is taxed at each stage of a supply chain. 

Example 1: How a business charges Output Tax and claims Input Tax credits

A GST-registered manufacturer imports leather from overseas for the manufacture of a bag. The manufacturer sells the bag to a GST-registered retailer. Thereafter, the retailer sells the bag to a consumer.

This is how GST works at each stage of the value chain:

1. Manufacturer   Pays GST to Singapore Customs for the import of leather

Import value = $100
Import GST paid = 7% X $100=$7 (input tax to claim from IRAS)
 Charges and collects GST for sale of bags to retailer

Selling price to retailer = $200
GST charged to retailer = 7% X $200 = $14 (output tax payable to IRAS)
 2. Retailer   Pays GST to Manufacturer

Purchase value = $200
GST paid = 7% X $200=$14 (input tax to claim from IRAS)
 Charges and collects GST for sale of bags to end consumer

Selling price to end consumer = $300
GST charged to end consumer = 7% X $300 = $21 (output tax payable to IRAS)
3. End-consumer  

Pays GST to Retailer

Purchase value = $300
GST paid = 7% X $300=$21

End consumer is not GST-registered. Therefore, he cannot claim the GST paid on his purchase from IRAS.

 

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Paying Output Tax and Claiming Input Tax Credits

As a GST-registered business:

  1. You must submit your GST return to IRAS one month after the end of each prescribed accounting period. This is usually done on a quarterly basis.
  2. You should report both your output tax and input tax in your GST return.
  3. The difference between output tax and input tax is the net GST payable to IRAS or refunded by IRAS.

Output tax is the GST charged to your customers for goods and services you sell. Input tax is the GST paid on your businesses purchases. If Output tax > Input tax, the net GST is payable to IRAS. If Output tax < Input tax, the net GST is refundable to you.

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  • Why must Singapore implement GST?

    GST was introduced in 1 Apr 1994 to enable Singapore to shift its reliance from direct taxes to indirect taxes. GST has also enabled Singapore to sustain a lower income tax rate. Being a tax on consumption, and not income, GST inherently encourages savings and investments.

  • I am not GST-registered. Can I claim GST incurred on my business purchases?

    No, if you are not a GST-registered business, you cannot claim the GST incurred on your purchases.