GST (Goods and Services Tax) is a consumption tax levied on the purchase of goods and services in Singapore. It is applicable when purchasing goods and services from both local and overseas businesses that are registered for GST in Singapore. Additionally, GST is charged when importing goods into Singapore.
There are two main conditions under which GST is chargeable:
1. The supply is made in Singapore: This means that the transaction or sale of goods and services occurs within the geographical boundaries of Singapore.
2. The supply is taxable in nature: Certain goods and services are considered taxable under the GST regime. These taxable supplies are subject to GST at the prevailing rate, which is currently 8% in Singapore.
What constitutes a supply of goods or services?
A supply refers to the provision of goods or services in exchange for a consideration.
There are two types of taxable supply:
1. Standard Rated Supplies:
These refer to the supply of goods or services made within Singapore and are subject to the prevailing GST rate of 8%. When businesses sell goods or provide services in Singapore, GST is charged at this standard rate.
2. Zero Rated Supplies:
Zero-rated supplies refer to the provision of goods or services on which GST is charged at a rate of 0%. These include:
Exports of Goods: Goods that are shipped or transported out of Singapore are considered zero-rated supplies. This encourages international trade and ensures that Singaporean goods remain competitive in global markets.
Provision of International Services: Certain international services fall under zero-rated supplies according to section 21(3) of the GST Act. These services include:
1. International Transport of Passengers and Goods: Services related to the transportation of passengers or goods that originate from or terminate outside Singapore.
2. Services Related to Land or Buildings Located Outside of Singapore: Services such as architectural, engineering, or consultancy services related to properties situated outside Singapore.
3. Services Related to Goods Located Outside of Singapore: Services like repairing, cleaning, or maintenance work on goods that are situated outside Singapore at the time of the service provision.
4. Services Performed Completely Outside of Singapore: Services that are performed entirely outside Singapore, regardless of the location of the recipient.
5. Services Supplied to Overseas Persons: Services provided to individuals or businesses that are located outside Singapore and not registered for GST.
By zero-rating these supplies, it helps facilitate international trade and reduces the tax burden on exports and certain international services, making Singapore an attractive destination for cross-border transactions.
There are two types of non-taxable supplies, namely:
1. Exempt Supplies:
Exempt supplies refer to the provision of goods or services that are exempt from GST. These supplies are not subject to GST and no GST is charged on them.
Some examples of exempt supplies include:
Sale and Lease of Residential Properties: The sale or lease of residential properties in Singapore is exempt from GST. This includes the sale of HDB flats, private residential properties, and rental of residential units.
Supply of Financial Services: Services provided by financial institutions, such as banking services, insurance services, and the provision of loans, are exempt from GST. This exemption helps ensure the stability and competitiveness of Singapore's financial sector.
Supply of Investment Precious Metals: The supply of investment precious metals, such as gold, silver, and platinum, in their primary form is exempt from GST. This encourages the development of Singapore as a precious metals trading hub.
Supply of Digital Payment Tokens: The supply of digital payment tokens, like cryptocurrencies, is exempt from GST. This exemption promotes the growth of the digital economy and supports innovation in the fintech sector.
Although these supplies are exempt from GST, businesses engaged in exempt supplies are generally not eligible to claim input tax credits on their purchases and expenses related to these supplies.
2. Out of Scope Supplies:
Out of Scope supplies refer to the provision of goods or services that are considered to be outside the scope of GST. Such supplies are neither subject to GST nor exempt from it.
Here are a couple of examples:
Goods Delivered Directly from a Place Outside of Singapore to Another Place Outside of Singapore: If goods are transported directly from a location outside Singapore to another location outside Singapore, without entering Singapore's customs territory, it is considered an out of scope supply. Since the goods do not physically enter Singapore, they are not subject to GST.
Private Transactions or Non-Business Related Transactions: Transactions that are of a private nature or not related to any business activities are typically considered out of scope supplies. For instance, when individuals engage in personal transactions, such as selling personal belongings or exchanging goods without a commercial purpose, these transactions fall outside the scope of GST.
Out of scope supplies are distinct from exempt supplies. While exempt supplies are subject to GST but have a 0% tax rate, out of scope supplies are completely outside the ambit of GST and are not subject to any GST obligations.
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