Factors to consider before registering voluntarily for GST

Before registering for GST voluntarily, you should consider whether:
  •  you qualify for voluntary registration;
  •  you are able to meet the conditions imposed for voluntary registration; and
  •  the benefits outweigh the costs of registering for GST.
 

Qualifying for voluntary registration

You may apply to be GST-registered on a voluntary basis even if it is not compulsory for you to register for GST.

To qualify for voluntary registration, you must satisfy any of the following:

  1. Your business makes taxable supplies;
  2. Your business only makes out-of-scope supplies. Out-of-scope supplies mainly refer to sales of goods which did not enter Singapore and goods in transit; 
  3. Your business makes exempt supplies of financial services that are also international services; or
  4. Your business procures services from overseas service providers and you would not be entitled to full input tax credit even if you were GST-registered.

If you have not started any of the above transactions, but intend to do so in future, you may also apply for voluntary GST registration. You will have to satisfy the Comptroller that you are operating or carrying on a business, and have firm intentions to carry out the above transactions.

If you do not have firm intentions or plans to carry out any of the above transactions, you should not apply for GST registration.

For more information on the different categories and types of taxable and non-taxable supplies, refer to the page on Goods and Services Tax: What it is and how it works.

Conditions for voluntary registration

Before registration

You need to ensure that you qualify for voluntary GST registration (see the section above) and fulfil all the conditions below before registering for GST.

1.  The company director/ sole-proprietor/ partner/ trustee /preparer of GST returns has completed and passed the two e-Learning courses "Registering for GST" and “Overview of GST”, before submitting the registration form. This is to ensure that you have a good understanding of the obligations and responsibilities of a GST-registered business before registering for GST.

These e-learning courses are not required if:

  • The company director / sole-proprietor / partner / trustee of the business has the experience of managing other existing GST registered businesses; or
  • The preparer of your GST returns is an Accredited Tax Advisor (ATA) or Accredited Tax Practitioner (ATP); or
  • The business is applying to be registered under the Overseas Vendor Registration Simplified Pay-only Registration Regime. 

2.   Apply for GIRO for payment and/or refund of GST.

3.   Provide the security deposit, if the Comptroller requires you to do so. For more information regarding the security deposit that may be required for your GST registration, please refer to our webpage on security deposit.

After registration

You must remain GST-registered for at least 2 years.

You are required to comply with the following conditions, failing which, your GST registration may be cancelled.

1.   Maintain a GIRO account for payment and refund of GST.

2.   Make taxable supplies within 2 years (or such approved longer period) if you have not started making taxable supplies at the point of applying for GST registration.

3.   Comply fully with the responsibilities of a GST-registered business.

4.   Any other conditions that may be imposed by IRAS at any point in time during your registration.

For businesses applying for voluntary registration under the Overseas Vendor Registration Simplified Pay-only Regime, a security deposit may be imposed by the Comptroller on a case-by-case basis before registration. After registration you will have to remain GST-registered for at least two years. In addition, you have to comply with the following to remain registered for GST:

1.  Comply fully with the responsibilities of a GST-registered business.

2.  Any other conditions which may be imposed by IRAS at any point in time during your registration.

Benefits and costs of voluntary registration

One of the benefits of registering for GST is that you can claim the GST incurred on your purchases, subject to the conditions for claiming input tax. However, if you are a partially exempt business(PDF,459KB) or an organisation with business and non-business activities (PDF, 696KB), you will not be able to claim your input tax in full, as the input tax attributable to the making of exempt supplies, wholly non-business activities and activities with non-business elements are not claimable.

When your turnover is near but below the S$1 million threshold for compulsory registration, registering voluntarily means that you will not need to monitor your turnover constantly.

However, the costs of being GST-registered may outweigh its benefits. As voluntarily registered businesses must remain registered for 2 years, you should assess the costs and benefits over a 2-year period before making the decision to register for GST.

The following are the areas you should consider before registering for GST:

     A. Responsibilities of being GST-registered

     B. Profile of your suppliers

     C. Profile of your customers

     D. Type of sales made by you

    A. Responsibilities of being GST-registered

    Once registered, you will be a GST collecting agent of the government. This means that there are responsibilities that you need to fulfil. Complying with these responsibilities may increase your administrative costs.

    For details on your responsibilities, you may refer to our webpage on Responsibilities of GST-Registered Businesses.

    B. Profile of your suppliers

    You may benefit from GST registration when your suppliers are GST-registered or you import goods and pay import GST to Singapore Customs. This is because you will generally be able to claim the GST paid, subject to the conditions for claiming input tax.

    However, when your suppliers are not GST-registered, there will be no GST to be claimed on your purchases, as your suppliers should not be charging GST.

    Examples 1 and 2 below illustrate the possible impact on your gross profit after GST registration, based on the GST registration status of your supplier.

     

     

    Before you are GST registered

    After you are GST registered

    Purchase price from supplier

    $107

    ($100 + $7 (GST))

    $107

    ($100 + $7 (GST))
     

    Sales price to customer

    $200

    $214

    ($200 + $14 (GST))

    GST

    (payable to IRAS or claimable from IRAS)

    $0

    Payable $7 GST

    ($14 - $7)

     

    Your gross profit

    (sales price - purchase price - GST pay to IRAS)

    $93

    ($200 - $107 - $0)

    $100

    ($214 - $107 - $7)

      Before you are GST registeredAfter you are GST registered 
     Purchase price from supplier

    $100                     
    (no GST))

    $100                 
    (no GST)
     Sales price to customer $200

    $214

    ($200 + $14 (GST))

     GST

    (payable to IRAS or claimable from IRAS)

     $0Payable $14 GST
    ($14 - $0)

     Your gross profit

    (sales price - purchase price - GST paid to IRAS)

    $100

    ($200 - $100 - $0)

    $100

    ($214 - $100 - $14) 

    C. Profile of your customers

    Once you are GST-registered, you will have to charge and collect GST from your customers.

    If your customers are GST-registered, you may be able to increase your selling price to include the GST chargeable, as your customers may be able to claim the GST charged by you.

    However, if your customers are not GST-registered, you may find it more difficult to increase your selling price to include the GST chargeable, as your customers will not be able to claim the GST that you charge. Hence, there may be a need for you to absorb the GST.

    Example 3 illustrates the impact on your gross profit after GST registration, if you have to maintain your selling price to remain competitive. 

    Your customer is not GST-registered . Assuming that your sale price is fixed (e.g. due to market competition), registering for GST results in a reduction in gross profit.

     

     

    Before GST Registration

    After GST registration

    Increase sales priceMaintain sales price  

    Purchase price from supplier

    $100

    (no GST)

    $100

    (no GST)

     

    $100

    (no GST) 

    Sales price to customer

    $200

    (no GST)

    $214

    (GST $14 (7% x $200))

     

    $200

    (GST $13.08 (7/107 x $200)) 

    GST

    (payable to IRAS or claimable from IRAS)

    $0

    Payable $14 GST

    Payable $13.08 GST 

    Gross profit

    (Sale price - Purchase price - GST paid to IRAS)

    $100

    $100

    ($214 - $100 - $14)

    $86.92

    ($200 - $100 - $13.08) 

    D. Type of sales made by you

    When you export goods or provide services to overseas customers, you may zero-rate your supplies (i.e. charge GST at 0%), provided that the supplies qualify for zero-rating.

    Since the supplies are zero-rated, there will be no impact on your selling price after GST registration.

    You may benefit from GST registration because you may be able to claim the GST incurred on your purchases. Example 4 illustrates how your gross profit will be higher after GST registration if you make only zero-rated supplies.

    To check whether your supplies may be zero-rated, please refer to:

     

    Before you are GST registered

    After you are GST registered

    Sale price of goods

    $200

    $200

    Purchase price of goods

    $107

    (cannot claim GST)

    $107

    (inclusive of GST $7)

    GST paid to/ claimed from IRAS

    (GST charged on sale - GST incurred on purchase)

    $0

    Claimed $7

    Gross profit

    (Sale price - Purchase price + GST claimed from IRAS)

    $93

    $100