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Benefits and Costs of Voluntary GST Registration

We all know that companies with annual turnover or revenue of a million Singapore dollars and above are required to be GST (Goods & Services Tax) registered. However, you should note that even if a company’s annual revenue does not hit a million Singapore dollars, a company will still be able to voluntarily be GST registered if it fulfills all the necessary requirements and if the company decides that it is worthwhile to be GST registered after working out the actual numbers.

Let us have a look at what are the benefits and costs of being a GST registered company in Singapore.

Benefits

GST paid by Company is Claimable

When a company is a GST registered company, whenever it orders goods or services from suppliers that are also GST registered, the company will stand to benefit as it will be able to claim the GST paid on the goods or services from its suppliers. The list of GST registered businesses can also be found on Inland Revenue Authority of Singapore (IRAS) website. A GST registered company will also have a unique GST registration number upon successful GST registration.

However, you should also note that if the company’s suppliers are not GST registered, GST will not be claimable since there is no GST component to be paid to the suppliers.

In terms of business or industrial spaces rental, a GST registered company can also claim the GST portion on the rental if the landlord is also GST registered.

Likewise for sales, if a warehouse or factory is sold by a GST registered company to a buyer who is using his / her GST registered company to purchase the property, the GST portion paid by the buyer can be claimed.

0% GST Charged for Zero-Rated Goods

If a company is GST registered and if they export zero-rated goods or offer zero-rated international services, the GST registered company charges zero percent GST for these exports or overseas services if their export products or international services qualify as zero-rated supplies. This is unlike the usual GST which is chargeable for non zero-rated goods or services.

Since the goods exported or international services provided are zero-rated (0% GST charged), there will not be any changes in the sale price of the export goods or international services even if a company decides to be GST registered.

In this case, a GST registered company may benefit from the GST registration because it will still be able to claim the GST incurred on its purchases if the purchases are from a GST registered supplier. If a company which only does exports of zero-rated goods or provides only zero-rated international services decides to be GST registered, its gross profit would increase after GST registration. For clarifications on whether your export goods or international services qualify to be zero-rated, you may visit IRAS’s website.

Costs

Responsibilities of GST Registered Companies

A GST registered company also acts as an agent of the Singapore government. This is true as GST registered companies collect GST for the government. As agents, there are also certain roles & responsibilities to fulfill. In fulfilling these roles & responsibilities, administrative costs of GST registered companies may also go up due to the resources required.

IRAS website will guide you on the roles & responsibilities of GST registered companies and what needs to be done to fulfill these roles & responsibilities.

Compulsory to Charge Customers GST

For any GST registered company, it is also compulsory to charge customers GST.

If a company decides to be GST registered and if customers of the GST registered company are also GST-registered, it will probably not be difficult to adjust the price of goods to be subject to GST. This is because GST registered customers will still be able to claim the GST charged on the goods or services.

If customers of a GST registered company are not GST registered, it will possibly be more challenging to adjust the price of the goods or services to be subject to GST as customers are not able to claim the GST that they paid.

How to Know If It Is Worthwhile

In order to figure out whether it will be worthwhile to be a GST registered company, a company should do detailed calculations and work out the sums to see if the figures make business sense. There are also a number of examples of these calculations available on IRAS’s website which show you the gross profit calculations before and after GST registration. Alternatively, you may also consult a professional tax advisor.

Source : IRAS

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