What SME Owners Need To Know: Comprehensive Guide To Upcoming Singapore GST Rate Adjustment 2024

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Aug 30, 2023

What SME Owners Need To Know: Comprehensive Guide To Upcoming Singapore GST Rate Adjustment 2024

Whether you're a newly GST-registered enterprise facing the GST rate change for the first time or seeking a refresher to glide smoothly through the second GST rate adjustment, the Inland Revenue Authority of Singapore (IRAS) has compiled a comprehensive guide for businesses on how your business can effectively brace itself for the impending GST rate alteration.

Let's delve into the essential insights to streamline your preparations, sidestep common pitfalls, and leverage digital solutions tailored to facilitate your transition amidst the 2024 GST adjustments.

The Upcoming Shift to a 9% GST Rate in 2024

Effective January 1, 2024, Singapore's GST rate will ascend from 8% to 9%, constituting the second phase of the two-step GST rate alteration unveiled by the Finance Minister during the 2022 Budget announcement. The initial phase saw the rate climb from 7% to 8% on January 1, 2023. The additional revenue generated from this increment will be channeled into bolstering healthcare outlays and ensuring the well-being of our senior citizens. With the goal of fostering a seamless transition to the new 9% GST rate, all businesses registered for GST must proactively initiate their preparatory measures.

Three Key Focus Areas for Smooth Transition

Refer to the comprehensive checklist provided on the IRAS website to gauge your business's readiness for the impending GST rate modification. To navigate this transition with finesse, concentrate your efforts on these three pivotal domains:

1. Update systems such as accounting and invoice systems: Get ready to update software and IT systems for example, POS and retail management systems that your organizations use so as to support the new GST rate starting 1 January 2024.

2. Fixate new GST rate to display prices: Implement new price displays to be quoted whether written or verbal for the public as the final price (i.e. price tags, price lists, marketing collaterals and websites) that they have to pay before 1 Jan 2024 and from 1 Jan 2024 onwards. Take below for your price displays:

Price inclusive of GST at 8% applicable before 1 Jan 2024.

Price inclusive of GST at 9% with effect from 1 Jan 2024.

3. Apply the correct GST rate for sales transactions and reverse charge supplies: Although your suppliers might be issued with the pending invoice with 8% rate for GST, you are reliant to indicate the new rate of 9% to suppliers as of new rate change transitional rules.

For this, supply spanning GST Rate change is applicable-

1. when invoice is issued before 1 Jan 2024 with 8% GST rate and goods and services are not delivered or performed,

2. when full payment is received and goods are delivered after 1 Jan 2024, and

3. when full payment is received and services are performed after 1 Jan 2024.

However, if all supplies and services are fully performed and delivered before the rate change in 2023 or when invoice is only issued with full payment received after 1 Jan 2024, they can elect to charge and account for GST at 8% only.

Common Errors during Rate Changes

Reflecting on the initial phase of the GST rate modification, a minority of businesses inadvertently committed a few common errors. Familiarize yourself with these pitfalls to ensure a mistake-free preparation for the second phase of the rate change:

i. Charging GST at 9% before 1 Jan 2024
ii. Charging or displaying 8% GST from 1 Jan 2024
iii. GST amount is calculated correctly but wrong GST rate is reflected on receipts of payment/tax invoices issued

Digital Services and Solutions by IRAS

As your business gears up for the shift in GST rates, seize this opportunity to explore digital solutions tailored to your accounting and retail management necessities. Integration of these digital tools not only simplifies record-keeping but also facilitates long-term adherence to tax obligations.

For a comprehensive list of accounting software aligned with IRAS's technical requisites, consult the IRAS Accounting Software Register Plus. Some of these solutions might also qualify for financial support through the Productivity Solutions Grant. Further details regarding eligibility criteria and the application process are available on the GoBusiness website.

Transparent Communication of Price/Fee Adjustments

In light of the first adjustment to applicable GST rates, certain companies attribute price increases or changes in service charges primarily or exclusively to a 1% increase in GST rates, as well as increases in raw material and administrative costs. With the second phase of GST looming, it is vital that all GST-registered businesses disclose to consumers the reasons for any price adjustments. When implementing price adjustments, make sure to provide transparent explanations and avoid misleading consumers into believing that price increases are solely due to GST increases.

The Committee Against Profiteering (CAP) remains committed to combating unreasonable price increases justified by GST hikes and is committed to thoroughly investigating all feedback on such cases.

Key Considerations before Opting for Voluntary GST Registration

For businesses yet to undergo GST registration, it's vital to note that registration becomes mandatory when your taxable turnover exceeds S$1 million by the calendar year's end or when there's a reasonable anticipation of surpassing S$1 million in turnover within the upcoming 12 months.

If your business is presently non-GST registered but you're contemplating voluntary registration to reclaim GST on purchases, a comprehensive evaluation of your business scenarios and costs, encompassing GST compliance expenses, is advised before finalizing your decision.

Here is the explanation video for an in-depth exploration of factors to contemplate prior to GST registration.

Here are additional online resources for your businesses to facilitate applicable GST Rate changes curated by IRAS.