• a22162

Voluntary Registration for GST

Updated: 1 day ago

Factors to Consider Before Registering Voluntarily for GST



One of the benefits of registering for GST is that you can claim the GST incurred on your purchases, subject to the conditions for claiming input tax. However, if you are a partially exempt business or an organisation with business and non-business activities, you will not be able to claim your input tax in full, as the input tax attributable to the making of exempt supplies, wholly non-business activities and activities with non-business elements are not claimable.


When your turnover is near but below the S$1 million threshold for compulsory registration, registering voluntarily means that you will not need to monitor your turnover constantly.


However, the costs of being GST-registered may outweigh its benefits. As voluntarily registered businesses must remain registered for 2 years, you should assess the costs and benefits over a 2-year period before making the decision to register for GST.


The following are the areas you should consider before registering for GST:


A. Responsibilities of being GST-registered

B. Profile of your suppliers

C. Profile of your customers

D. Type of sales made by you


A. Responsibilities of being GST-registered

Once registered, you will be a GST collecting agent of the government. This means that there are responsibilities that you need to fulfil. Complying with these responsibilities may increase your administrative costs.


B. Profile of your suppliers

You may benefit from GST registration when your suppliers are GST-registered or you import goods and pay import GST to Singapore Customs. This is because you will generally be able to claim the GST paid, subject to the conditions for claiming input tax.


However, when your suppliers are not GST-registered, there will be no GST to be claimed on your purchases, as your suppliers should not be charging GST.


Examples 1 and 2 below illustrate the possible impact on your gross profit after GST registration, based on the GST registration status of your supplier.


Example 1: Supplier is GST-registered Before you are GST registered


Sales price to customer $200


Purchase price from supplier $107 ($100 + $7 GST)


GST (payable to IRAS or claimable from IRAS) $0


Your gross profit $93 (sales price - purchase price - GST paid to IRAS) ($200 - $107 - $0)

After you are GST registered


Sales price to customer $214 ($200 + $14 GST)


Purchase price from supplier $107 ($100 + $7 GST)


GST Payable $7 GST (payable to IRAS or claimable from IRAS) ($14 - $7)


Your gross profit $100 (sales price - purchase price - GST paid to IRAS) ($214 - $107 - $7)



Example 2: Supplier is not GST-registered Before you are GST registered


Sales price to customer $200


Purchase price from supplier $100 (no GST)


GST (payable to IRAS or claimable from IRAS) $0


Your gross profit $100 (sales price - purchase price - GST paid to IRAS) ($200 - $100 - $0)


After you are GST registered


Sales price to customer $214 ($200 + $14 GST)


Purchase price from supplier $100 (no GST)


GST Payable $14 GST (payable to IRAS or claimable from IRAS) ($14 - $0)


Your gross profit $100 (sales price - purchase price - GST paid to IRAS) ($214 - $100 - $14)

C. Profile of your customers

Once you are GST-registered, you will have to charge and collect GST from your customers.


If your customers are GST-registered, you may be able to increase your selling price to include the GST chargeable, as your customers may be able to claim the GST charged by you.


However, if your customers are not GST-registered, you may find it more difficult to increase your selling price to include the GST chargeable, as your customers will not be able to claim the GST that you charge. Hence, there may be a need for you to absorb the GST.


Example 3 illustrates the impact on your gross profit after GST registration, if you have to maintain your selling price to remain competitive.


Example 3: Your customer is not GST-Registered

Your customer is not GST-registered. Assuming that your sale price is fixed (e.g. due to market competition), registering for GST results in a reduction in gross profit. Before GST Registration


Sales price to customer $200 (no GST)


Purchase price from supplier $100 (no GST)


GST $0 (payable to IRAS or claimable from IRAS)


Gross profit (Sale price - Purchase price - GST paid to IRAS) $100


After GST registration

Maintain sales price


Sales price to customer $200 (GST $13.08 (7/107 x $200))


Purchase price from supplier $100 (no GST)


GST Payable $13.08 GST (payable to IRAS or claimable from IRAS)


Gross profit $86.92 (Sale price - Purchase price - GST paid to IRAS) ($200 - $100 - $13.08)


D. Type of sales made by you

When you export goods or provide services to overseas customers, you may zero-rate your supplies (i.e. charge GST at 0%), provided that the supplies qualify for zero-rating.


Since the supplies are zero-rated, there will be no impact on your selling price after GST registration.


You may benefit from GST registration because you may be able to claim the GST incurred on your purchases. Example 4 illustrates how your gross profit will be higher after GST registration if you make only zero-rated supplies.


Example 4: Zero-rated Supplies Before you are GST registered


Sale price of goods $200


Purchase price of goods $107 (cannot claim GST)


GST paid to/ claimed from IRAS $0

(GST charged on sale - GST incurred on purchase)


Gross profit $93 (Sale price - Purchase price + GST claimed from IRAS)


After you are GST registered


Sale price of goods $200


Purchase price of goods $107 (inclusive of GST $7)


GST paid to/ claimed from IRAS Claimed $7 (GST charged on sale - GST incurred on purchase)


Gross profit (Sale price - Purchase price + GST claimed from IRAS) $100


Contacts

For more information on the above or if you need assistance on other GST matters, please contact Bestar.


Bestar will be pleased to assist you with the application for voluntary GST registration and preparation of GST returns. Please contact us for more information.

1 view0 comments

Recent Posts

See All

Do I Need to Register for GST Information for you to assess whether you are required to register for GST. Compulsory registration You must register for GST if your taxable turnover is: Under the retro