It was most recently announced that the goods and services tax (GST) rate will increase from 7 to 9 per cent in Singapore, starting with 8 per cent on 1 January 2023. This will subsequently increase to 9 per cent on 1 January 2024. On top of this impending GST increase, businesses may be feeling the squeeze with the rise in other costs – from materials and labour to rent and utilities.
As a business owner, here’s what you may need to prepare for to ensure your company remains profitable:
In general, businesses with a taxable turnover above $1 million are required to register for GST. Fortunately, GST-registered businesses are eligible for claims on the GST paid for purchases from the Inland Revenue Authority of Singapore (IRAS). Thus, they will not be directly impacted by the GST increase.
However, non-GST registered businesses – on the other hand – will need to factor it in as part of their expenses. This can be tough for some businesses, especially if they’re already struggling to keep afloat.
As a solution, businesses may consider applying for GST registration on a voluntary basis. Your company may be eligible if you are involved in taxable supplies, out-of-scope supplies or exempt supplies of financial services. That being said, there are other factors to take into account first before applying for GST registration. This includes the following:
Note that your business has to remain registered for two years. If you are certain of the above, you may proceed to submit your application online through the myTax Portal on IRAS.
As a business owner, you’re likely aware of the importance of consumer spending. After all, it’s consumers who buy your products and services, contributing to the continued success of your business. However, due to the hike in GST, your target audience may soon become more mindful of where they spend their money. Existing and potential customers may start tightening their belts and this can spell trouble for most businesses.
There are still opportunities for businesses to be smart and strategic about what they sell and how they market themselves. With enough working capital, you may consider attracting customers abroad to continue growing your business. You may tap into new revenue streams and gain a competitive edge. That being said, something as simple as a positive customer experience can ensure that you have buyers willing to buy from you – regardless of the GST increase.
Expect the penalties to be more severe once the increase in GST is implemented. Fines may be imposed on GST should you under-declare or claim more than necessary.
There are many intricacies to GST compliance, which can be daunting for business owners who are not accountants. One way to make this task easier is to partner with an accounting firm to take care of necessary paperwork and filings. Doing so can provide a number of benefits, such as reduction of administrative burden and access to knowledgeable professionals who can help you stay on top of ever-changing regulations.
Keep in mind that this list is not exhaustive, so be sure to consult with your trusted accounting company to get specific advice for your business in Singapore. For companies big and small, one key piece of support is an accounting partner. Chartsworth’s range of services from tax to accounting can take some of the burden off your shoulders, helping you make the most of your business’ potential.
For more information, feel free to get in touch with us and start planning for the upcoming GST increase.