As the Goods and Services Tax (GST) will be raised from 7% to 8% with effect from 1 Jan 2023, the Inland Revenue Authority of Singapore (IRAS) encourages all GST-registered businesses to start their preparation early for a smooth transition to the new GST rate.
Main Things to Prepare
To check if your business is ready for the rate change, you can use the checklist on IRAS’ website. These are the 3 main things you need to do:
- Update your systems to incorporate the new GST rate. Examples of systems include accounting and invoicing systems, retail management systems, and cash register and receipting systems for point-of-sales billing. You are encouraged to approach your systems vendors early as system changes may take time to implement.
- Change your price displays to reflect the new GST rate. If you are unable to change your price displays overnight, you may display two prices: (i) prices inclusive of GST at 7% applicable before 1 Jan 2023; and (ii) prices inclusive of GST at 8% on or after 1 Jan 2023.
- Understand the rate change transitional rules and train your staff on the correct application of the rules.
Businesses are also reminded that they cannot charge and collect GST at 8% before 1 Jan 2023.
How to apply the Transitional Rules
If your business has transactions that straddle 1 Jan 2023, you will need to familiarise yourself with the rate change transitional rules to ensure that you charge the correct GST rate. Here are some examples on how the transitional rules will apply to different rate change scenarios:
Supply Straddling GST Rate Change
Application of Transitional Rules
Invoice issued for a supply of goods before 1 Jan 2023 (when the GST rate is 7%).Full payment received and goods delivered after 1 Jan 2023 (when the GST rate is 8%).
As full payment is received and goods delivered after the rate change, GST must be accounted at the new rate of 8%. This is even though the invoice is issued to the customer before the rate change.
Invoice issued for services and full payment received after 1 Jan 2023.Services fully performed before 1 Jan 2023.
Businesses can elect to charge and account for GST at 7% since the services are fully performed before the rate change.
Ease of GST Rate Change Implementation with Digital Solutions
You can consider taking this opportunity to switch to digital solutions for your business’ accounting and retail management needs. Adopting these digital solutions will also help your business to simplify record-keeping and comply with tax obligations more easily in the long run. For the list of accounting software that meet IRAS’ technical requirements, please refer to the IRAS Accounting Software Register. Some of the software may also qualify for funding support under the Productivity Solutions Grant. More information on the eligibility criteria and application process for the grant can be found on the GoBusiness website.
For Non-GST Registered Businesses – Factors to Consider Before Registering for GST Voluntarily
You are required to register for GST if your business’ taxable turnover exceeds S$1 million at the end of the calendar year or if at any point of time you can reasonably expect your business’ turnover to exceed S$1 million in the next 12 months. If your business is currently non-GST registered but you wish to register for GST voluntarily to claim the GST incurred on purchases, you are advised to evaluate your business scenarios and your business costs (including the costs of complying with GST obligations) before making the decision.
Watch this video on the factors you should consider before registering for GST.
GST Rate Change Resources
To provide guidance and support to businesses for the 2023 GST rate change, IRAS has published an e-Tax Guide “2023 GST Rate Change – A Guide for GST-Registered Businesses” and FAQs “Frequently Asked Questions for Businesses – GST Rate Change 2023”. You can also watch the YouTube video for the key highlights of the e-Tax Guide.
IRAS will continue to work closely with businesses and support you in your preparations for GST rate change.
For more information on the GST rate change for businesses, please visit www.go.gov.sg/irasgst-rc-businesses.
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