Goods and Services Tax (GST) is a transaction-based tax that applies to:
- Local sale and purchase of goods and services
- Import of goods (except goods imported via air/post that are valued under S$400)
However, there is no GST on services (e.g., design, advertising and professional work) bought from overseas suppliers for consumption in Singapore. This gives overseas suppliers an unfair advantage over local suppliers (who have to charge GST) since local businesses will end up having to pay more for the same service if they decide to engage the local supplier.
Effective date
In order to achieve parity and level the GST treatment on similar services provided by local and overseas supplies for consumption in Singapore, GST will now apply to imported services by way of reverse charge for certain Singapore businesses effective 1 January 2020.
Who should be concerned?
The mentioned change will only apply to the following businesses when they procure services from overseas suppliers for consumption in Singapore:
- Non-GST registered business
- GST registered business not entitled to full GST claim1
This means that most GST registered businesses in the retail, food & beverage as well as the consumer products sector will not be affected unless they also deal with sale/lease of residential properties or financial derivatives (e.g., trading of shares on the Singapore Exchange).
How it will impact retail, F&B, and consumer products businesses
For non-GST registered businesses, this means potential GST registration should they satisfy the conditions under the reverse charge rules. This will also include the administrative and compliance commitments to lodge periodic GST return(s) timely.
For GST registered businesses not entitled to full GST claim, the example below demonstrates the additional GST reporting requirements:
Prior to 1 January 2020
You purchase rights and/or intellectual property services (e.g., bringing in certain brands into Singapore) from an overseas supplier. There is no need for you to consider GST on such imported services.
| GOODS AND SERVICES TAX RETURN (GST F5) | |
| 1) Supply | |
| Box 1: Total value of standard rated supply | S$0.00 |
| Box 6: Total Output Tax | S$0.00 |
| 2) Purchases | |
| Box 5: Total value of taxable purchases | S$0.00 |
| Box 7: Total Input Tax | S$0.00 |
| GST amount expense off | S$0.00 |
| Assuming no other supply and purchase transactions | |
On and after 1 January 2020
You purchase rights and/or intellectual property services (e.g., bringing in certain brands into Singapore) from an overseas supplier. You now need to report GST due on such imported services (on behalf of the overseas supplier) and simultaneously claim the corresponding GST as your input tax (subject to input tax claiming conditions).
| GOODS AND SERVICES TAX RETURN (GST F5) | |
| 1) Supply | |
| Box 1: Total value of standard rated supply (rights / IP services procured from overseas supplier) |
S$2,000,000.00 |
| Box 6: Total Output Tax | S$140,000.00 |
| 2) Purchases | |
| Box 5: Total value of taxable purchases (rights / IP services procured from overseas supplier) |
S$2,000,000.00 |
| Box 7: Total Input Tax (assuming 90% of S$140,000 claimable) |
S$126,000.00 |
| GST amount expense off (i.e. S$140,000 – S$126,000) | S$14,000.00 |
| Assuming no other supply and purchase transactions | |
Aside from the abovementioned, businesses should also review key areas below to ensure they continue to remain compliant once the new GST rule takes effect:
- Calibrate their internal processes and accounting systems to incorporate GST reporting requirements on imported services
- Educate relevant process owners (e.g., procurement, IT and finance teams) to help them recognise what falls under the coverage of imported services as well as ensure timely GST reporting
- Manage and post imported service transactions through the main accounting system or via off the record journal postings to manage GST risk at the transactions level
- Track their account payable report for payments due to overseas suppliers for more than 12 months and reverse the GST entries previously reported on the supply and purchase transactions
- Source for more affordable local and/or overseas service providers to ensure that cash flows and margins will not be greatly affected
We leverage data analytics to help businesses minimise and manage GST risks from imported services. For more information, contact our team of GST professionals:
Richard Ong, Partner & Head, GST Services
Accredited Tax Advisor (GST)
T +65 6594 7821
[email protected]
Huang Yanlin, Associate Director
Accredited Tax Advisor (GST)
T +65 6715 1140
[email protected]
Lee Meow Ling, Senior Manager
Accredited Tax Practitioner (GST)
T +65 6715 1142
[email protected]
1 Financial institutions, developers & owners of mixed use properties, proprietary trading businesses, companies with sizeable interest income from inter-company loans/income from dormitories & residential properties/proceeds from sale of shares traded on SGX.