What is GST?
The goods and services tax (GST), also known as value-added tax (VAT), is a consumption tax imposed on goods and services in Singapore, regardless of whether they are acquired from domestic or overseas suppliers.
As GST is a self-assessed tax, and Singapore-based businesses are therefore required to assess their need to register for GST. Companies must register for GST if they:
- Earn a taxable turnover of more than S$1 million (US$738,000) during a 12-month period at the end of the calendar year.
- Expect to earn a taxable turnover of more than S$1 million (US$738,000) in the next 12 months.
The GST rate in Singapore is currently 7 percent. However, the government is planning to increase the GST rate to nine percent between 2021 and 2025. The main justification for this rise is to fund future infrastructure projects and increase spending on social welfare.
The GST that is levied on customers is known as ‘output tax’, and the GST that is incurred on business purchases and expenses, which includes the import of goods, is known as the ‘input tax’. The difference between the output and input tax is the net GST payable to the government.
Taxable vs. Non-Taxable Goods and Services
The Inland Revenue Authority of Singapore (IRAS) classifies goods and services into two categories: taxable supplies and non-taxable supplies. Companies that are registered for GST must charge GST on all taxable supplies.
Taxable supplies are further categorized into standard-rated supplies, which are taxed at the flat GST rate of 7 percent, and zero-rated supplies, which are untaxed (0 percent GST rate).
Standard-rated supplies that are subject to the 7 percent GST rate include:
- Most locally-sold goods.
- Most locally-provided services.
- Imported services, such as Business-to-Business (B2B) supplies provided to GST-registered businesses in Singapore, and Business-to-Consumer (B2C) supplies provided to non-GST registered individuals and businesses.
In addition, from January 1, 2023, GST will be levied on imported low-value goods (valued up to and including S$400 (US$298)) and B2C non-digital services.
Zero-rated supplies include exported goods (those sold to an overseas customer and shipped to an overseas address) and services included in the List of International Services in Section 21(3) of the GST Act.
Non-taxable supplies are classified as exempt supplies and out-of-scope supplies. The following supplies are currently exempt from GST:
- Sale and rental of unfurnished residential property
- Precious metals that are imported or locally sold
- Financial services
- Digital payment tokens
Goods that are delivered from and to addresses overseas and private transactions are considered out-of-scope supplies.
GST on Overseas Digital Services
Starting from January 1, 2020, foreign digital service providers will have to register for GST and charge for GST under Singapore’s Overseas Vendor Registration (OVR) regime. Previously, only services procured from local businesses were subject to GST. Digital services include:
- Downloadable mobile applications, e-books, and movies;
- Subscriptions to TV shows, music, and online gaming; and
- Downloadable drivers, software, and
However, foreign digital service providers will need to have a yearly global turnover of more than S$1 million (US$738,000), and sell more than S$100,000 (US$73,800) worth of digital services to customers in Singapore, before they are obligated to register and charge GST.