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GST

Claiming GST Incurred Before GST Registration

GST incurred before the business is registered for “GST” can be claimed if certain conditions are met. IRAS has produced a reference guide on this topic in assessing your claims, conditions for claiming pre-registration GST and documents to maintain to claim pre-registration GST.

The very first step of this process is to complete the “pre-registration GST Checklist for Self-Review of Eligibility of Claim”, which can be downloaded from IRAS link here, to assess eligibility to make a claim on GST incurred on business purchases made before GST registration.  This checklist also includes a calculator feature to help you compute the amount of Pre-registration GST claimable.

 

Flowchart for Pre-registration Claims on Goods

Flowchart for Pre-registration Claims on Good1

In summary, the business must satisfy all of the following conditions for claiming Pre-registration GST incurred on Goods.

  1. The goods are purchased or imported by your business for the purpose of making taxable supplies (standard-rated supplies and zero-rated supplies);
  2. For goods acquired within 6 months before the date of your GST registration, the goods are still held by your business at GST registration;
  3. For goods acquired more than 6 months before the date of your GST registration, the goods have not been consumed (i.e. used) or supplied by your business before the date of your GST registration; and
  4. The pre-registration GST claims are not disallowed under Regulation 26 and 27 of the GST (General) Regulations.

 

 

 

 

Flowchart for Pre-registration Claims on Property Rental, Utilities and Services

Flowchart for Pre-registration Claims on Property Rental, Utilities and Services1

The business must satisfy all of the following conditions for claiming Pre-registration GST incurred on Property Rental, Utilities and Services.

  1. The expenses are incurred by your business for the purpose of making taxable supplies (standard-rated supplies and zero-rated supplies);
  2. The expenses are incurred by your business within 6 months before the date of your GST registration;
  3. The expenses are not directly attributable to supplies made by your business before the date of your GST registration; and
  4. The pre-registration GST claims are not disallowed under Regulations 26 and 27 of the GST (General) Regulations.

 

 

 

 

 

 

Apportionment of Pre-Registration GST

Pre-registration GST is allowable only to the extent that the goods or services acquired are used or to be used for taxable supplies made after GST registration.

If some of the goods acquired within 6 months before your GST registration date have been sold, transferred or disposed of, you are required to apportion the GST incurred according to the actual units held at your registration date.

If the goods acquired by you more than 6 months before your GST registration date have been used to make supplies straddling your GST registration (i.e. supplies before and after GST registration) or have been partially consumed before your GST registration, you are required to apportion the GST incurred.

Similarly, if the services, property rental or utilities acquired by you are used to make supplies straddling your GST registration, you are required to apportion the GST incurred. Only the portion of GST that is attributable to the supplies made after registration is claimable.

Documents to Maintain to Claim Pre-registration GST

To claim Pre-registration GST incurred on goods, you are required to maintain a stock account showing:

  • quantities purchased;
  • quantities used in the making of other goods;
  • date of purchase; and
  • date and manner of subsequent disposal of both the quantities purchased and quantities used in the making of other goods

For services, you are required to maintain a list showing:

  • description of services purchased;
  • date of purchase; and
  • date of disposal of the service (if any)

In addition, you are required to support your claims with evidence such as tax invoices, import permits, payment evidence, etc.

When and how to Claim Pre-registration GST

You should claim pre-registration GST in your first GST return provided that you satisfy all the conditions for claiming pre-registration GST.

The value of taxable purchases and corresponding GST amount should be included in Box 5 and Box 7 respectively.

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1 Inland Revenue Authority of Singapore (2018). IRAS e-Tax Guide GST: Pre-registration Claims on Goods and Services (For Businesses Registered for GST on or after 1 July 2015) (Third Edition).

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Goods and Services Tax (GST)

Introduction

GST

GST

Goods and Services Tax (GST), also known as Value-Added Tax (VAT) in many countries, is a broad-based consumption tax levied on the import of goods and the supply of goods and services in Singapore. It was implemented in Singapore on 1st April 1994 to shift the reliance from direct taxes to indirect taxes. Through the implementation of GST, the Singapore government does not have to rely on the taxation of income to raise revenue; instead the government can generate revenue through taxation on consumption as well. As such, Singapore is able to maintain a relatively low income tax rate and remain economically competitive.

GST may also be beneficial to businesses. For example, if your business is GST-registered, you are able to claim the GST paid to your suppliers which helps to reduce your business cost. Thus, GST-registered businesses do not suffer a tax cost and simply act as collecting agents of GST on behalf of the IRAS.

The current rate of GST in Singapore is 7%.

Categorisation of Goods and Services

In Singapore, not all goods and services are subject to GST. For the purpose of GST, good and services are classified into 2 categories: Taxable supplies and Non-taxable supplies.

As the name suggests, GST is chargeable on goods and/or services categorised as taxable supplies. Taxable supplies are further categorised as standard-rated or zero-rated.  Standard-rated supplies are goods sold or services provided locally. GST is chargeable at the prevailing GST rate for standard-rated supplies. Meanwhile, zero-rated supplies are goods exported overseas or services classified as international services under Section 21(3) of the GST Act. For zero-rated supplies, GST is chargeable at 0%.

Non-taxable supplies are supplies where GST is not applicable. They include exempt supplies and out-of-scope supplies. Exempt supplies can be divided into 3 categories:

– Sale and rental of residential properties
– Financial services
– Importation and local supply of investment precious metals

Meanwhile, out-of-scope supplies refer to sales where goods did not enter Singapore (i.e third country sales) and goods in transit (e.g. sales made within Free Trade Zone and Zero GST Warehouses). Out-of-scope supplies also refer to private transactions which is defined as non-business activities performed without payment or any expectation of return from the recipients.

Registration Liability

Even though Singapore has implemented GST, not all businesses have to/are allowed to charge and collect GST. Businesses have to be GST-registered before they are permitted to charge and collect GST.

As a business owner, you may be concerned if your business is required to register for GST. To determine your business’ GST registration liability, we’ll have to look at your business’ taxable turnover. Taxable turnover is the total value (excluding GST) of all taxable supplies (includes all standard-rated and zero-rated supplies but excludes exempt supplies, out-of-scope supplies and sale of capital assets) made in Singapore.

It is mandatory for your business to register for GST if the taxable turnover:

  • Exceeded S$1 million in the past 4 quarters (ending March, June, September and December); or
  • Is expected to be more than S$1 million in the next 12 months.

If your business’ taxable turnover did not exceed S$ 1 million, you may register for GST voluntarily. However, you may wish to note that once registration is approved, the business must remain registered for at least 2 years and will have to comply with the GST regulations. As compliance to the GST regulations may be administratively costly, businesses, not mandated by law to be GST-registered, are encouraged to carefully weigh the pros and cons prior to registering voluntarily.

When to register

You must apply for GST registration within 30 days of the end of the quarter where your business is liable for GST registration or within 30 days from the date on which you forecast that your business’ taxable turnover for the next 12 months will be more than S$ 1 million.

If GST is not registered promptly within the 30-day notification period, penalty may be imposed for late notification of GST registration liability. In addition, the date of registration will be backdated to the date that your business is liable to be registered even if no GST has been collected from your customers.

How to register

To register for GST, the form GST F1 “Application for GST Registration” has to be completed and submitted together with the supporting documents. Alternatively, registration can be done online via IRAS’ myTax Portal.

For partnerships, an additional form GST F3 “Notification of Liability to be Registered: Details of All Partnerships and Partners” has to be completed and submitted together with GST F1.

For overseas entities, a local agent in Singapore must be appointed to handle all GST matters i.e. collection and payment of GST and filing of GST returns etc. In addition to GST F1, a letter of authorisation to appoint a local agent has to be submitted.

GST registration application will be processed within 2 working days for compulsory registration via online and 10 working days for compulsory registration via paper application. Meanwhile, it takes longer for application for voluntary registration to be processed i.e. 10 working days for online applications and 1 month for paper applications.

Once GST registration is approved, you will receive a Notification of GST Registration Letter. This notification will state your GST registration number and effective date of GST registration.

Output Tax and Input Tax

You should start charging GST on customers from the effective date of GST registration. This GST charged to customers is known as output tax.

In addition, GST-registered businesses will be able to claim GST paid on business purchases and expenses incurred for making taxable supplies from the effective date of GST registration.  This GST incurred is known as input tax.

The difference between output tax and input tax is the net GST payable to/refunded by the IRAS.

Application for exemption from GST registration

If your business makes solely or mostly zero-rated supplies, you may apply for exemption from GST registration.

Exemption from GST registration allows businesses to save on the hassle of GST collection and filing. However, businesses exempted from GST registration will not be able to claim input tax, which could help businesses to reduce costs.

To apply, the form GST F2 “Application for Exemption from Registration” has to be completed and submitted together with the required documents.

Exemption will be granted only if both conditions are met:

  • More than 90% of your total taxable supplies are zero-rated; and
  • The total amount of output tax that would have been chargeable if you were GST-registered is less than the GST incurred on imports and/or purchases from GST-registered suppliers.

For more information on GST, please refer to GST section of IRAS website here.

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