6 Things Every Singaporean Should Know About The GST

Whenever we buy something in Singapore, we see a 9% GST slapped on top of the price in the receipt. In most other countries, this is also known as the Value-Added Tax (VAT).

This is a tax that affects everyone in Singapore, and we would assume that most people are familiar with how GST works. Yet, beyond knowing that we have to pay 9% tax on goods and services that we consume, many of us may not really know much more about it.

Here are 6 things that we think everyone in Singapore should know about the GST.

#1 GST Was First Introduced In 1994

Singapore introduced GST on 1 April 1994. Starting rate of 3%, GST has been raised several times over the years to 9% today.

Source: IRAS

#2 GST Is Estimated To Bring In $21.73 Billion In Revenue To The Government In 2025

The Singapore Government estimates that GST will bring in $21.73 billion in FY2025 – an increase of 5.5% over last year. This will make it the second-largest revenue contributor for the Government, behind Corporate Income tax, and just ahead of Personal Income Tax.

Source: MOF

#3 We Have To Pay GST On Goods And Services Bought From Overseas

Since 1 January 2020, we have to pay GST on all digital services that we buy from overseas service providers that are GST-registered. These service providers include video streaming services, digital copies for games, in-app purchases from mobile games, and cloud storage services.

Since 1 January 2023, GST is also payable on lower-value goods worth $400 or below that are imported into Singapore via air or post, and purchased from GST-registered suppliers.

We also have to pay GST when bringing goods back into Singapore when we travel overseas. There is a GST relief limit based on the time that we spend outside of Singapore. For those travelling overseas for 48 or more, the GST relief is $500, while those who spend less than 48 hours overseas only qualify for a GST relief of $100.

#4 Only Businesses With Taxable Turnover Of More Than $1 Million Need To Register For GST

When we pay for goods and services in Singapore, we may not have to fork out a GST everytime. This is because not all businesses in Singapore are GST-registered. Only businesses that have a taxable annual turnover of more than $1 million are required to register for GST.

GST is collected by these businesses and payable to the government. Non-GST registered businesses are not supposed to charge the additional 9% to their customers. If they do, they may be cheating their customers.

Read Also: When Must A Company Register For GST, And How You Can Register?

#5 There Is No “Double GST Tax” Effect

Some people may think that there is a possible effect of “double GST tax” for goods that pass through multiple GST-registered businesses during the process of creating the good before it reaches the end-users.

Here is the reason for their argument.

1. Business A sells Product X to business B.
2. Business B turns Product X into Product Y. Sells it to Business C.
3. Business C turns Product Y into Product Z. Sells it to the end-consumer.

Assuming that each business earns a margin of 10% and required to charge 9% GST, this could be a logical breakdown of the final cost of the good.

 From the calculation above, it may appear that the government is earning a total of $0.34 from a product that ultimately costs the consumer $1.58. The total GST collected is 21.5%, rather than the 9% it was supposed to be. The reason for this is because of the multiple times GST are charged whenever it passes through a business.

But this is NOT how GST works…

GST-registered businesses can claim for qualified GST expenses that they incur. This means that even though a product they bought may cost $1.09 (after GST), the business can claim $0.09 back from the government. As such, they do NOT have to pass down the cost to the next business or customer that they sell it to.

Here is a more accurate depiction of how businesses would pass down GST cost to the end-users.

The government actually collects a total of $0.30 but returns $0.19 back to the various businesses involved in creating the good. Their net collection is $0.11, which is 9% of the final selling price of their product at $1.21.

#6 Businesses Have To Quote All Prices Inclusive Of GST

Most of the time, we do not have to do our own mental calculation of how much GST will add to the cost of a product that we are buying. This is because businesses are required by IRAS to show all prices to their customers inclusive of GST. For example, any advertised price on advertisements must include the cost of GST. Businesses are not allowed to quote you a price without the GST, and then add it in after you have committed to the purchase.

One exception is for businesses in the F&B and hotel industry. The reason for this is because such businesses typically have a service charge that leads to difficulties for them in displaying GST-inclusive prices. While they are not required to display GST-inclusive prices, they have to prominently indicate a statement that their prices are subjected to GST. This explains why most restaurants always put a “++” sign on their menu.

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