Transitional rules apply to supplies which span the change of GST rate. You may be required to adjust for the GST rate chargeable on your supplies and to account for GST at the new rate.

Supplies that span the change of GST rate

A supply spans the change of GST rate where one or two of the following events takes place wholly or partially on or after 1 Jan 2023: 

  1. the issuance of invoice;
  2. the receipt of payment (or the making of payment in respect of a reverse charge supply);
  3. the delivery of goods or performance of services.

Examples of supplies spanning the change of rate

The following are examples of a supply that span the change of GST rate:

  • You issue an invoice on your supply of goods to your customer before 1 Jan 2023, but you only receive full payment and deliver the goods after 1 Jan 2023.
  • You issue an invoice on your supply of services to your customer after 1 Jan 2023, but you receive partial payment and perform a part of the services before 1 Jan 2023.
  • As an RC business, you procure services from an overseas supplier where the invoice is issued and the services are performed before 1 Jan 2023, but you only make full payment after 1 Jan 2023.

If you are a local supplier or an overseas supplier registered under the Overseas Vendor Registration (OVR) regime for supplies of digital services

The transitional rules apply when:

1. You issue an invoice for your supply on or after 1 Jan 2023 and

(a) You do not receive full payment before 1 Jan 2023;

(b) You have delivered or performed a part or all of the goods or services before 1 Jan 2023; and

(c) You wish to elect to apply 7% GST on the extent of the value of goods delivered or services performed before 1 Jan 2023.

 

2. You issue an invoice for your supply before 1 Jan 2023 and you receive full or part payment  on or after 1 Jan 2023.

1. Invoice is issued on or after 1 Jan 2023

If you issue an invoice for your supply on or after 1 Jan 2023 but you receive full payment before 1 Jan 2023, the supply is subject to 7% GST. 

If you do not receive full payment before 1 Jan 2023 and you have delivered or performed a part or all of the goods or services before 1 Jan 2023, you can elect to charge 7% GST on the higher of:

(a) The payment received before 1 Jan 2023; or 

(b) The value of goods delivered or services performed before 1 Jan 2023. 

The remaining value of the supply is subject to GST at 8%.

Example 1: Supply involving invoice issued after 1 Jan 2023

You deliver goods to your customer on 26 Dec 2022 when the GST rate is 7%. You issue a tax invoice dated 3 Jan 2023 for the sales of goods and you receive full payment from your customer on 10 Jan 2023.

Under the general time of supply rule, 8% GST is chargeable on the supply as the tax invoice is issued and full payment is received after the rate change. However, you can elect to charge 7% GST on the entire value of the supply as the goods are fully delivered before 1 Jan 2023.

If you have already issued a tax invoice with 8% GST charged to your customer before you make the election, you will need to provide your customer with a credit note by 15 Jan 2023 for the amount of GST overcharged*.

You do not need to seek prior approval from IRAS when you make an election for your supply. However, you should maintain the documentary evidence to show that the goods are delivered before the rate change.

*Note: Alternatively, you may also issue a credit note to cancel the original tax invoice issued on 3 Jan 2023. At the same time, you must reissue a new tax invoice to charge GST at 7%. 

Furthermore, in scenarios where you have made an election to charge GST at 7% on the supply or part of the value of supply but is unable to issue the credit note/new tax invoice by 15 Jan 2023, the Comptroller will allow you up to 90 days after the date of issue of your original tax invoice to issue credit notes/new tax invoices for ease of compliance. 

For more information, please refer to the e-Tax Guide: 2023 GST Rate Change: A Guide for GST-registered businesses. 
2. Invoice is issued before 1 Jan 2023
If you have received full payment before 1 Jan 2023, or if you have delivered all the goods or performed all the services before 1 Jan 2023, the entire value of the supply is subject to 7% GST.

In all other scenarios, 8% GST will apply on the lower of:

(a) The payment received on or after 1 Jan 2023; or 
(b) The value of goods delivered or services performed on or after 1 Jan 2023. 

 

Transactions to be adjusted

You have issued an invoice showing 7% GST before 1 Jan 2023 but you receive payment and deliver the goods / perform the services on or after 1 Jan 2023:

  1. If the original invoice issued by you is a tax invoice, you should adjust the GST amount charged on the original tax invoice by issuing a credit note and a new tax invoice (showing 8% GST) to your customer by 15 Jan 2023.
  2. If the original invoice issued by you is a non-tax invoice (e.g. receipt issued to your non-GST registered customer), you can adjust for the transaction based on your normal business practices.

When to account for the additional output tax

You should account for the additional output tax on the part of supply that is subject to 8% GST at the earliest of the following events:

  1. When the new invoice for the part of supply is issued;
  2. When the payment for the part of supply is received; or
  3. 15 Jan 2023.

Example 2: Supply involving invoice issued before 1 Jan 2023 – full payment received after 1 Jan 2023

On 14 Dec 2022, you issue a tax invoice for your supply of services (value of $1,000) and you receive the full payment on 4 Jan 2023. You perform part of the services (value of $200) before 1 Jan 2023 and the remaining part of the services (value of $800) after 1 Jan 2023.

Under the transitional rules, you are required to charge 8% GST on $800 of the supply (being the lower of the value of the payment received ($1,000) or services performed ($800) on or after the rate change date).  

You should* issue the following to your customer by 15 Jan 2023:
  • a credit note for $856 ($800 plus 7% GST of $56); and
  • a new tax invoice for $864 ($800 plus 8% GST of $64).

You should declare the credit note and new tax invoice in the GST accounting period in which they are issued as follows:

Credit note adjustment
Issuance of new tax invoice
Net adjustment

Reduce your value of standard-rated supplies by $800

Increase your value of standard-rate supplies by $800

-
Reduce your output tax by $56Increase your output tax by $64Increase your output tax by $8

 

*Note: Alternatively, you may also issue a credit note to cancel the original tax invoice issued on 14 Dec 2022 charging GST at 7% and at the same time, issue new tax invoice(s) for the parts of the value of supply which are subject to GST at 7% and 8% respectively. For more information, please refer to the e-Tax Guide: 2023 GST Rate Change: A Guide for GST-registered businesses.

Example 3: Supply involving invoice issued before 1 Jan 2023 – payments straddle 1 Jan 2023

On 14 Dec 2022, you issue a tax invoice for your supply of services (value of $1,000). Before 1 Jan 2023, you receive payment of $500 and perform part of the services (value of $200). After 1 Jan 2023, you receive the remaining payment of $500 and perform part of the services (value of $800).

Under the transitional rules, you are required to charge 8% GST on $500 of the supply (being the lower of the value of the payment received ($500) or services performed ($800) on or after the rate change date).  

You should issue the following to your customer by 15 Jan 2023:
• a credit note for $535 ($500 plus 7% GST of $35); and
• a new tax invoice for $540 ($500 plus 8% GST of $40).

You should declare the credit note and new tax invoice in the GST accounting period in which they are issued as follows:

 

Credit note adjustment
Issuance of new tax invoice 
Net adjustment

Reduce your value of standard-rated supplies by $500

Increase your value of standard-rate supplies by $500

-
Reduce your output tax by $35Increase your output tax by $40Increase your output tax by $5

 

If you are a Reverse Charge (RC) business

The transitional rules apply when you procure imported services and:

  1. The invoice issued by your overseas supplier is on or after 1 Jan 2023 and you wish to elect to apply 7% GST on the extent of the value of services performed before 1 Jan 2023; or
  2. The invoice issued by your overseas supplier is before 1 Jan 2023 and you make full or part payment on or after 1 Jan 2023.
1. Invoice is issued on or after 1 Jan 2023
If the supplier’s invoice is issued on or after 1 Jan 2023 but you make full payment before 1 Jan 2023, the supply is subject to reverse charge at 7% GST. 

If you do not make full payment before 1 Jan 2023 and a part or all of the services are performed before 1 Jan 2023, you can elect to account for GST on the supply at 7% on the higher of:

(a) The payment made before 1 Jan 2023; or 

(b) The value of services performed before 1 Jan 2023. 

The remaining value of the supply is subject to GST at 8%. 

Example 4: RC transaction involving invoice issued after 1 Jan 2023

You procure imported services from your overseas supplier who performs the services on 21 Dec 2022 when the GST rate is 7%. The supplier’s invoice is issued on 11 Jan 2023 and you make the full payment on 23 Jan 2023.

Under the general time of supply rule, the supply of imported services is subject to reverse charge at 8% GST as the invoice is issued and full payment is made after the rate change. 

However, you can elect to account for GST at 7% on the entire value of the supply as the services are fully performed before 1 Jan 2023.

You do not need to seek prior approval from IRAS when you make an election for your reverse charge supply. Nevertheless, you should maintain the necessary documentary evidence and records to show that you have made the election and the services are performed before the rate change.

2. Invoice is issued before 1 Jan 2023
If you have made full payment before 1 Jan 2023 or if the services are fully performed before 1 Jan 2023, the entire value of the supply is subject to reverse charge at 7% GST.

In all other scenarios, 8% GST will apply on the lower of:

(a) The payment made on or after 1 Jan 2023; or 
(b) The value of services performed on or after 1 Jan 2023.

When to account for the additional output tax

You should account for the additional output tax on the part of supply that is subject to reverse charge at 8% GST at the earlier of:

1. When the payment for the part of supply is made; or
2. 15 Jan 2023.

If you have elected to apply reverse charge at the end of the longer period, the time to account for output tax depends on when the longer period takes place. Please refer to the e-Tax Guide 2023 GST Rate Change: A Guide for GST-registered Businesses (PDF, 663KB) for more information.

Example 5: RC transaction involving invoice issued before 1 Jan 2023

You procure imported services (value of $1,000) from your overseas supplier who issues the invoice on 3 Dec 2022 and performs part of the services (value of $300) on 15 Dec 2022. You make full payment for the supply on 5 Jan 2023.

Under the general time of supply rule for RC transactions, you should account for GST at 7% on $1,000 in the GST accounting period in which 3 Dec 2022 falls, i.e., the date when the tax invoice is issued.

Under the transitional rules, you are required to account for GST at 8% on $700 of the supply (being the lower of the value of the payment made ($1,000) or services performed ($700) on or after the rate change date). You should account for the additional GST of $7 ($700 x 1%) in the GST accounting period in which 5 Jan 2023 falls.
If you account for GST on RC transactions based on the posting date 
If you have been accounting for GST on your RC transactions based on the earlier of posting date or date of payment made, the transitional rules for rate change will depend on the posting date (instead of the invoice date). Please refer to the e-Tax Guide 2023 GST Rate Change: A Guide for GST-registered Businesses (PDF, 663KB) for more information on how the transitional rules will apply to such transactions.

FAQs

Please refer to Frequently Asked Questions for Businesses – GST rate change 2023 (PDF, 168KB) for more business scenarios on the application of the GST rate change rules.

For frequently asked questions relating to consumer purchases that span the change of GST rate, please refer to GST Rate Change for Consumers.