As announced by Minister for Finance in Budget 2022, the second step of the GST rate change will take place 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 will be raised
from 8% to 9% from 1 Jan 2024.
All GST-registered businesses are encouraged to start their preparations early for a smooth transition to the second GST rate change. Below are some points for you to take note.
1. How will my GST-registered business be affected?
For any standard-rated supply of goods and services that you make on or after 1 Jan 2024, you must charge GST at 9%. For instance, if you issue an invoice and receive payments for your supply on or after 1 Jan 2024, you must account for GST at 9%.
2. Avoiding rate change errors
Below are some errors to avoid when preparing for the second GST rate change:
Error #1 - Charging GST at 9% before 1 Jan 2024
Your payments received before 1 Jan 2024 should be subject to the current rate of 8%. This is so even if the goods and/or services are to be delivered on or after 1 Jan 2024.
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 from 1 Jan 2024 and
Error #2 – Charging or displaying GST at 8% from 1 Jan 2024
You may have multiple sales channels (e.g. mobile apps, self-ordering kiosks, physical outlets and online websites) where you display prices and make sales of goods and services.
Review and ensure that the receipts/invoices issued for all sales channels are updated to charge 9% GST from 1 Jan 2024. Your price displays for all sale channels should also be updated to 9% GST from 1 Jan 2024.
If you intend to absorb the additional 1% GST, check that the receipts/invoices issued and price displays that mention the GST rate are updated to 9% GST from 1 Jan 2024.
Error #3 – GST amount is computed correctly but wrong GST rate is reflected on receipts/invoices issued
GST at 8% = $9 (GST amount is computed correctly but wrong GST rate is reflected)
Total amount payable = $109
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.
3. Communicating reasons for price/fee increases to consumers
During the first step of the GST rate change from 7% to 8%, it has been observed that some businesses had increased prices or service fees. This was to account for the additional 1% GST rate increase and higher raw material and overhead
costs. However, some businesses attributed the increase primarily or solely to the increase in GST.
Ahead of the increase in the GST rate to 9%, the Government would like to remind businesses 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.
For more information on how to explain a price increase to consumers, businesses can refer to IRAS’ webpage on the GST Rate Change for Businesses.
4. Checking if your business is ready for the rate change
You may use the checklist on IRAS’ website to help you prepare your business early for the rate change.
There are 3 main things you need to do:
i. Update your systems to incorporate the new GST rate from 1 Jan 2024
Please check early with your in-house IT team or software vendors on how they can work with you to support a smooth transition. Examples of systems include accounting and invoicing systems, retail management systems, and cash register and receipting systems
for point-of-sales (POS) billing.
ii. Prepare your price displays to reflect the new GST rate from 1 Jan 2024
Price displays should be inclusive of GST at 9% with effect from 1 Jan 2024, 12 a.m. 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.
- Prices inclusive of GST at 9% with effect from 1 Jan 2024.
Price displays include price tags, price lists, advertisements, publicity brochures and websites. 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.
iii. Understand the GST rate change transitional rules and apply the correct GST rate for sales transactions and reverse charge supplies spanning 1 Jan 2024.
If your supplies straddle the date of GST rate change, you will need to consider the transitional rules to determine whether to charge GST at 9% or 8%.
How transitional rules are applied