In Budget 2022, the Minister for Finance announced that the GST rate will be increased from:
(i) 7% to 8% with effect from 1 Jan 2023; and
(ii) 8% to 9% with effect from 1 Jan 2024.
The revenue from the increase in GST will go towards supporting our healthcare expenditure, and to take care of our seniors.
GST rate to apply
Generally, you should charge GST at the prevailing rate at the time of supply.
If you issue an invoice and receive payment for your supply on or after 1 Jan 2024, you should charge GST at 9% on the supply, unless you have elected to charge GST at 8% under the rate change transitional rules subject to the conditions for the election.
Where you are required to charge GST at 9% on the supply on/after 1 Jan 2024, you must account for GST at 9% in your GST return. This is regardless of whether you have collected the GST payment from your customers.
Example: GST to be accounted for on a supply subject to GST at 9% on/after 1 Jan 2024 where GST is collected at 8%
You have collected GST at 8% on your supply of goods on 2 Jan 2024 ($1,080 inclusive of 8% GST) as your systems were not updated in time. Notwithstanding this, you will still be required to account for GST on the supply at 9% in your GST return.
The amount of output tax to account is based on the tax fraction (9/109) of the total payment received for your supply. In this case, the output tax to include in your GST return will be $89.17 ($1,080 x 9/109).
The failure to account for GST on your supplies at the correct rate may attract penalties. Being prepared for GST rate change will help you avoid such increases to your business and compliance costs.
As a guide, please refer to the Checklist for 2024 GST rate change preparation on the changes that may be required to your systems and business processes to apply the new rate.
You must show GST-inclusive prices on all price displays to the public (e.g. price tags, price lists, advertisements, publicity brochures, website). Prices that are quoted, whether written or verbal, must be GST-inclusive as the public needs to know upfront the final price that they have to pay.
An exception is granted to hotels and food & beverage (F&B) establishments that impose service charge on their goods and services. They are not required to display GST-inclusive prices for goods and services that are subject to service charge
to ease their operations. However, they must still display a prominent statement informing customers that the prices displayed are subject to GST and service charge.
The exception does not apply to hotels and F&B establishments that do not impose a service charge. It is also not applicable to F&B establishments that levy a nominal service charge without genuine business reasons other than to avoid displaying
GST-inclusive prices. Such businesses are still required to display GST-inclusive prices. Those who do not comply with the price display requirement could be subject to a fine.
For more information, you may refer to Displaying and Quoting Prices.
If you are unable to change your price displays overnight, you may display two prices:
- Prices inclusive of GST at 8%, applicable before 1 Jan 2024; and
- Prices inclusive of GST at 9%, applicable with effect from 1 Jan 2024.
Communicating reasons for price/ fee increases to consumers
During the first step of the GST rate change from 7% to 8%, some businesses have been observed to be increasing prices or service fees to account for the additional 1% GST rate increase and also to take into account higher raw material and overhead costs. However, some businesses have attributed the increase in price / fees primarily or solely to the increase in GST.
Ahead of the increase in GST rate from 8% to 9%, businesses are reminded to be transparent in communicating the reasons for any price increases to consumers. Businesses should explain the main reasons for the increases in price/ fee, and not misrepresent the situation to consumers by attributing the price increases primarily or solely to the increase in GST.
The Committee Against Profiteering (CAP) takes a serious view of any unjustified price increases using the GST increase as an excuse and will investigate all feedback on such cases.
Businesses can refer to the following Frequently Asked Questions (FAQs) from CAP's website on how to explain a price increase to consumers and the type of cases that CAP will investigate.
How should I explain a price increase?
Businesses should be transparent with their prices. Sharing the following information will help consumers understand the reasons for your price increase:
You must not misrepresent the reasons for any price increase as this will mislead consumers.
What cases will Committee Against Profiteering (CAP) investigate?
The CAP will investigate all allegations of unjustified price increases of essential goods and services that use the Goods and Services Tax (GST) as a cover.
A number of factors could lead to price increases, such as an increase in operating costs including wages, utilities, rental and materials.
If a business raises its prices, it is not acceptable for the business to use the GST increase as the reason for raising prices before the GST implementation, nor is it acceptable for a business to raise prices by more than the GST after the GST implementation, citing the GST as the reason.
Errors to avoid
Below are some errors to avoid when preparing for the second GST rate change from 8% to 9%:
Error #1 - Charging GST at 9% before 1 Jan 2024
Your payments received in 2023 should be subject to GST at 8%. This is so even if the goods and/or services are to be delivered on or after 1 Jan 2024.
To avoid this error, you should check that your systems (e.g. accounting and invoicing systems, retail management systems, cash register and receipting systems for point-of-sales (POS) billing) are configured for the 9% GST rate to take effect on or after 1 Jan 2024 and not earlier.
Error #2 - Charging or displaying GST at 8% on/after 1 Jan 2024
You may have multiple sales channels where you display prices and make sales of goods and services such as mobile Apps, self-ordering kiosks, physical outlets and online websites.
You should ensure that your receipts/ invoices issued under all sales channels are updated to charge 9% GST* on/ after 1 Jan 2024. Your price displays for all sale channels should also be updated to 9% GST on/ after 1 Jan 2024.
Even if you intend to absorb the additional 1% GST, you should still ensure that your receipts/ invoices issued and price displays that mention the GST rate are updated to 9% GST on/ after 1 Jan 2024.
* Where transitional rules apply, GST at 8% may be applicable on your supplies that straddle 1 Jan 2024. You may refer to Transitional Rules for GST Rate Change for more information.
Error #3 - GST amount is computed correctly but wrong GST rate is reflected on receipts/ invoices issued
To avoid such errors, check that the correct GST rate is reflected when you issue receipts/ invoices. Such checks should be performed when testing systems and processes before and after the implementation of 9% GST.
Funding support for pre-approved solutions
IRAS organised webinar sessions (via Zoom) for GST-registered businesses from Jun to Dec 2023. Our last webinar for the second GST rate change on 1 Jan 2024 was conducted on 21 Dec 2023.
If you missed our webinars in 2023, you may refer to the following video to prepare for GST rate change on 1 Jan 2024.