Goods and Services Tax (GST) in Singapore is a broad-based consumption tax of 9%, levied on most supplies of goods and services as well as on goods imported into Singapore. Here is how GST works in Singapore:
- GST is charged at each stage of the supply chain on the value added. Businesses that are GST-registered collect GST on their sales (output tax) and pay GST on their purchases (input tax).
- The net GST payable to the government is the difference between the output tax collected from customers and the input tax paid on business purchases and imports. This ensures GST is effectively only charged on the value added at each stage and avoids double taxation.
- Businesses must register for GST if their taxable supplies exceed SGD 1 million within 12 months or expect to exceed this threshold.
- Certain goods and services are exempt from GST, such as most financial services, sale or lease of residential properties, and sales of investment precious metals.
- Goods exported and international services are zero-rated for GST, meaning GST is charged at 0%.
- The GST also applies to imported goods, collected by Singapore Customs at the point of import, with the importer able to claim input tax if registered.
- There are specific schemes and reliefs available to ease cash flow and compliance for GST-registered businesses, including e-invoicing requirements and import reliefs.
- The GST system includes an Overseas Vendor Registration regime requiring overseas suppliers to register and charge GST on remote services and low-value imported goods supplied to Singapore consumers.
In summary, GST is a consumption tax paid by the end consumer but collected in stages through the supply chain by GST-registered businesses, with a current rate of 9% in Singapore.
Here is a simplified example illustrating the mechanics of GST (Goods and Services Tax) in Singapore:
Suppose there are three stages in the supply chain for a product—a manufacturer, a retailer, and the end consumer.
- The manufacturer imports raw materials worth S$100.
- The manufacturer pays GST at 9% on the import—S$9 (input tax)
- Then the manufacturer makes the product and sells it to the retailer for S$200 plus 9% GST (output tax), which is S$18. So the retailer pays S$218 to the manufacturer.
- The manufacturer pays the tax authorities the difference between GST collected from the retailer (S$18) and GST paid on imports (S$9), which is S$9.
- The retailer can claim back the S$18 GST paid to the manufacturer as input tax. Then the retailer sells the product to the end consumer for S$300 plus 9% GST, which is S$27. The consumer pays S$327 to the retailer.
- The retailer pays the tax authorities the difference between GST collected from the consumer (S$27) and GST paid to the manufacturer (S$18), which is S$9.
- Overall:
- Overseas raw material seller collects and pays S$9 GST to government
- Manufacturer collects and pays S$9 GST to government
- Retailer collects and pays S$9 GST to government
- This amounts to S$27, the final amount borne by consumer
Thus, although GST is charged at every stage, each business only pays the net GST on the value they add. The final consumer bears the full GST cost.
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