treeviewSINGAPORE (Reuters) – With two months until the new goods and services tax (GST) takes effect on January 1, most GST-registered firms have begun planning for the increase, according to the Inland Revenue Authority of Singapore (Iras).
According to the tax administration, almost 40% of the 100,000 or so GST-registered enterprises will be coping with a rate adjustment for the first time. The last time GST was raised was in 2007.
Firms must verify that their systems and contracts are compliant when the GST rises to 8% on January 1.
“Those who have not yet begun should do so promptly and not wait until the last minute,” said Iras, delivering an update following the GST (Amendment) Bill discussion in Parliament earlier this week.
The two-step increase in the GST rate from 7% to 8% in 2023 and 9% in 2024 was announced in Budget 2022.
Firms must register for GST if their taxable turnover reaches $1 million at the end of the calendar year, or if they estimate turnover to exceed $1 million in the next 12 months at any time.
Pere Ocean, a beverage provider with roughly 70 people, is one of the early adopters.
Mr. Eugene Tan, it’s head of special projects, told The Straits Times that the company is already in talks with its ERP system supplier to guarantee compliance with the rate adjustment.
Accounting and human resources are among the company operations managed by enterprise resource planning software.
Mr. Tan also stated that advertising and other marketing materials would be evaluated to ensure that customers are up to date.
He stated that the corporation is focusing more on alerting clients, ensuring payments are done within specified timescales so that accounts may be updated properly, and retooling computer systems and the like to manage the changes.
“(If we do not do it correctly), it may look like we have raised our product cost, which might hurt the company,” Mr. Tan noted.
Firms should provide adequate time for their in-house IT staff or software vendors to implement the new GST rate into their systems.
Mr. Daniel Ang, the business development adviser at SME Centre @SMCCI, helps small and medium-sized businesses by providing advice and insights (SMEs).
Given the current economic situation, he and other experts have been assisting companies in addressing GST problems like profitability and expenses.
Mr. Ang stated that the biggest concern among executives is how the GST rise would affect profitability since customers are likely to cut down on spending as a result of the one percentage point increase.
SME shops dealing in non-essential items are likely to bear the brunt of it, he says, adding, “Businesses are also concerned about losing their consumer base if they transfer the financial burden to their customers” (them).
“And the decrease in client base will result in reduced sales income generated more than company expenditures, which would ultimately harm their bottom line.”
Important points to consider
Accounting and invoicing, retail management and cash register receipting, and point-of-sale billing should all be updated to reflect the new GST rate, which goes into effect on January 1.
They should also be aware of the transitional regulations that will apply following the rate adjustment on January 1 and ensure that their employees are properly informed.
When an invoice for goods is submitted before January 1 but the products are delivered and full payment is received after that date, GST at the new rate of 8% must be computed. This is because payment and delivery occur after the rate change.
When services are entirely provided before January 1 but bills are submitted after that date, firms can decide to charge 7% GST. This is because the services were completed before the tariff adjustment.
Businesses should also verify that their price displays incorporate the 8% GST that goes into effect on January 1.