The Singapore Government has already announced the increase in GST rates from 7 to 8% effective 1 January 2023 and from 8 to 9% on Jan 1 2024. With less than 7 months to go, all businesses need to start preparing for this change. Besides understanding the nature of the changes, companies need to ensure that their accounting teams are properly trained on the various scenarios that may impact their business. Accounting systems will need to be changed to reflect the new rates. With any change of rates, there will be an impact of transactions for the transition from one rate to another. There are some transactions that are continuous and are supplied over a period of time that straddle on either side of the date of change? Are you prepared to ensure a smooth transition and to ensure your GST returns are filed accurately?
The Inland Revenue Authority of Singapore has published guidance on some scenarios. The information below is excerpted from various sources from IRAS in a summarized format for the most common scenarios. There are additional rules for specific use cases that have not been included in the summary below. We would be happy to provide a response for specific queries on GST.
TIME OF SUPPLY RULES
Time of supply rules – earlier of when invoice is issued or when payment is received. This is the default tax treatment.
Not allowed to charge 8% before 1 Jan 2023 for invoices issued or payments received
Price displays must include new GST inclusive rates from 1 Jan 2023. If not enough time to change displays overnight, then two prices can be shown before 1st Jan 2023 one with 7% and one with 8%
TRANSITIONAL RULES
Transitional Rules – if a GST rate change straddles between one or more of the following events –
(1) issuance of invoice
(2) receipt of payment (or making of payment in the case of reverse charge supply
(3) delivery of goods / performance of services,
then refer to the following table for the correct GST treatment.
GST RATES – TAX TREATMENT
| GST Rate and Tax Treatment. | 12 Dec 2022 | 20th Dec 2022 | 1 Jan 2023 | 4th Jan 2023 | 6th Jan 2023 | 10th Jan 2023 |
| 7% | Full Payment | Rate Change | Invoice Issued | Goods Delivered | ||
| Time of supply rules à8% but 7% Election permitted since goods delivered before rate change | Goods Delivered | Rate Change | Invoice Issued | Full Payment | ||
| 8% | Rate Change | Invoice Issued | Services Performed | Full Payment | ||
| Time of supply rules à 8% (invoice issued) But $300 election permitted @ 7% and $700@ 8% | Part Goods delivered $300 | Rate Change | Invoice Issued $1000 | Full Payment $1000 | Part goods delivered $700 | |
| 7% on $300 received in 2002 & 8$ of $700 received in 2023 But 7% Election permitted for full $1000 (fully delivered in 2022) | Part Payment $300 | Goods delivered $1000 | Rate Change | Part Payment $700 | Invoice issued $1000 | |
| 7% on $300 and 8% on $700 But No election permitted as goods fully delivered in 2023 | $300 Part Payment | Rate Change | Invoice issued $1000 | Part Payment $700 | Goods delivered $1000 | |
| 7% on $200 received in 2022 & 8% on $800 received in 2023 OR Election permitted for 7% on $400 delivered in 2022 and 8% on $600 delivered in 2023. | Part Payment $200 | Part goods delivered $400 | Rate Change | Invoice issued $1000 | Part Payment $800 | Part Goods Delivered $600 |
| 7% on $600 received in 2022 & 8% on $400 received in 2023. No election necessary as Payment > Goods delivered | Part Payment $600 | Part goods delivered $200 | Rate Change | Invoice issued $1000 | Part payment $400 | Part goods delivered $800 |
| 7% | Invoice issued | Full payment | Rate change | Services performed | ||
| 7% | Invoice issued | Goods delivered | Rate change | Full payment received | ||
| 7% | Invoice issued | Rate Change | Full payment received | Services performed | ||
| 7% on $1000 (tax invoice issued 2022) AND Issue credit note for $856 (800 +7% $56) +New tax invoice – $864 (800 + 8% $64) because services were performed in 2023 | Part services performed $200 | Tax Invoice issued $1000 | Rate Change | Payment Received $1000 | Part Services performed $800 | |
| 7% (goods fully delivered in 2022) | Tax invoice issued Part Payment | Goods Fully Delivered | Rate Change | Part Payment | ||
| 7% on $1000 invoice issued in 2022 AND Issue credit note for $749 (700 +7% $49) 2023New tax invoice for $756 (700 + 8%) 2023 | Tax invoice issued $1000 | Part Payment $300 | Rate Change | Services Performed $1000 | Part Payment $700 | |
| 7% on $1000 invoice issued in 2022 AND Issue credit note for $642 (600 +7% $42) 2023New tax invoice for $648 (600 + 8%) 2023 | Tax invoice issued $1000 | Part goods delivered $400 & Part Payment $200 | Rate Change | Part Payment $800 | Part goods delivered $600 |
- GST election not applicable for business assets sold in satisfaction of debt.
- Election can only be performed by GST registered supplier (for self billing obtain consent from supplier in writing for 7%)
- Maintain proper documentary evidence. Comptroller approval not required for election
- If tax invoice @ 8% subsequently elected to charge 7% – issue credit note for the difference.
- Continuous Supplies e.g. license, tenancy and lease, supply of utilities, construction services, subscriptions for telecom, internet, video / music streaming – earlier of invoice issued or payment received with transitional rules applicable in the scenario where services were performed prior to rate change.
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