Tax:  Goods and Services Tax (GST).

Introduction: On the recommendation of the 1986 Economic Committee, Singapore000040000s Government decided to shift from direct to indirect taxes, to maintain its international competitiveness in attracting investments, and to sustain its economic growth. GST was first introduced in Singapore on 1st April 1994 at 3%. The GST rate was increased to 4% in 2003 to 5% in 2004 and to 7% in 2007.

Legislation: Goods and Services Tax (GST) Act, 2014.

Current Rate of Tax: The current rate of GST is 7%. .

Salient Features

1.    Goods and Services Tax (GST) is a broad-based value added tax/ consumption tax that is levied on the import of goods and services in Singapore. The tax is paid when money is spent on goods or services, including imports. It is a multi-stage tax which is collected at every stage of the production and distribution chain.

2.    GST is an indirect tax, expressed as a percentage (currently 7%) applied to the selling price of goods and services provided by GST registered business entities in Singapore.

3.    The only exemptions are for the sales and leases of residential properties and most financial services. Export of goods and international services are zero-rated.

4.    GST is levied on:

• goods and services supplied in Singapore by any taxable person in the course or furtherance of a business; and
• goods imported into Singapore by any person.

5.    GST tax is charged to the end consumer therefore GST normally does not become a cost to the company. Businesses merely act as collecting agents on behalf of Singapore tax department.

6.    GST is charged on taxable supplies. A taxable supply is a supply of goods or services made in Singapore, other than an exempt supply. A taxable supply can either be a standard rated (currently 7%) or zero-rated supply.

7.    Zero-rated supplies of goods and services are subject to 0% GST.

8.    GST is not chargeable on exempt supplies, of which there are two categories - sale and lease of residential land; and financial services. The difference between zero-rated and exempt supplies is that an entity who makes exempt supplies cannot claim input GST.

9.    For getting registration, registration form (GST F1) along with the necessary supporting documents must be sent to the tax authority. An additional form (GST F3), giving details of all the partners must be completed, in the case of partnership firms.

10.  The registration process takes approximately 3 weeks. Upon successful GST registration, one will receive a Notification of GST Registration letter which contains GST number, filing frequency and filing due dates as well as any other special instructions. You must file your GST returns electronically.

11.  GST can be considered a proportional tax if tax payments are expressed as a percentage not of income, but of lifetime consumption; savings and investments are tax-deferred, and when converted to consumption are subjected to GST.

The Singapore Government claims that the GST on its own is a flat tax but is part of an overall fiscal system that is highly progressive: higher-income earners pay the highest fraction of their income in taxes.