• Hong Kong
  • UK
  1. Osome Blog Singapore
  2. 3 Сases When It Makes Sense To Register for GST Voluntarily and 1 Case When It Doesn’t

3 Сases When It Makes Sense To Register for GST Voluntarily and 1 Case When It Doesn’t

Singapore tax law leaves it up to each business whose annual revenue is below S$ 1M to register for Goods & Services Tax (GST). However, some choose to register way before they pass the threshold.

So let us look into the meaning of voluntary registration under GST and reasons why a business would register with IRAS to pay the tax and find out how to actually save money by paying more tax.

By the way we can figure all of this out for you. Check out our Singapore accounting services!

1. You Buy in the Country A Lot But You Often Sell Your Products Overseas

The goods and services you sell to someone outside Singapore are GST-rated at 0%. So if you produce your stuff in Singapore but sell it overseas, you don’t have to pay 7% of GST on overseas purchases.

At the same time, if you are dealing with Singapore suppliers who are registered for GST, you pay the 7% GST on the fabric you used for the jeans and on your other supplies.

If you are GST-registered, you can claim back any GST you paid for the goods and services that you use to produce your own. We go into more detail about what counts as a business expense and what doesn’t in our overview of GST.

Thus, registering can reduce a lot of your business expenses by 7%. Let’s crunch the numbers using the actual GST rate:

Cashflow GST charged GST claimed
Sales total 300 000
Sales abroad 240 000
Sales in Singapore 60 000 4 200
Rent paid 60 000 4 200
Advertising 84 000 5 880
Other expenses (office supplies, fuel for business car fleet, software subscriptions, etc.) 6 000 420
Total 4 200 10 500
GST balance 6 300

As you can see, although you had to charge your Singaporean clients the 7% of the tax, you still have cut the cost of running your operation by S$6300.

2. You Want to Improve Your Company’s Image

Every company whose annual revenue exceeds S$1 million is required to register for GST. So most companies that are registered have passed that threshold. If you register before that, you would get a small reputation boost.

3. You Want to Help The Government Help You

Every company filing for GST helps the Singapore government to get a bigger pool of data to analyze when making decisions. It helps them to predict their budget more accurately and gives them data to implement changes to the law so businesses are more comfortable in Singapore.

A good example of that would be the addition to GST law of definition of “Prescribed Goods”. Companies that deal in this kind of products no longer have to account for GST themselves, passing that responsibility to the customer. In our overview of how GST works, we talk about it in more detail.

That argument works only if you mean to operate in Singapore for a long time. Otherwise, you just might not be there to reap the benefits, when the changes happen. With the “Customer Accounting for Prescribed Goods” implementation, it took the IRAS about 3 years to crack down on fraud schemes and amend the procedures to suit everyone.

Signing Up for GST To Claim GST on Supplies Is Not Always a Great Idea

If you are subject to the standard GST rate, registering early to claim back the GST you pay on supplies might not be such a great idea. Let’s compare two different scenarios to see why. To make counting simple, let us imagine the GST rate is 10%.

If you don’t charge GST

You are a production company that has 2 GST registered suppliers.

Supply 1 costs you S$20 + S$2 GST = S$22

Supply 2 costs you S$20 + S$2 GST = S$22

You take Supplies 1 and 2 and produce your product — Supply 3. When calculating the price you will charge, you add up the supplies’ prices and then add S$20 on top: S$10 to cover your expenses and S$10 to make money on the sale.

In total: S$22+S$22+S$20=S$64

As a result, the customer pays S$64. Your profit is S$10.

If you charge GST

Supply 1 costs you S$20 + S$2 GST = S$22

Supply 2 costs you S$20 + S$2 GST = S$22

You take Supplies 1 and 2 and produce Supply 3. The mark-up of yours is S$20. You claim back S$4 of input tax, your Supply 3 now costs S$60 instead of S$64. But you then add your own GST to the price, and it becomes S$66.  

The customer pays S$66. Your profit is S$10.

As you can see, in the second case your customer pays more but the amount of money you make on the purchase remains the same. In fact, with the additional bookkeeping and accounting burden, you might even make less than S$10 per purchase. This is because you will need to hire more people or give your staff a pay raise to take care of the extra administrative liability: you will have to calculate GST on purchases and sales and file GST reports.  

However, it might still be a good idea for you to go for early registration if the cost of running your business is high. For example, you might buy a lot of office supplies very often from GST-registered vendors. Сlaiming back the 7% you paid on those might be helpful.

Share this post:

Tips to run your business smarter.
Delivered to you monthly.

You'll receive a verification email you'll have to open and confirm the subscription.

You might like it

Government Grant

Wage Support & Rental Relief for Businesses in Singapore’s Stabilisation Phase

Tighter COVID-19 restrictions will be implemented from 27 September to 21 November 2021. Find out what support SG companies can receive from this Stabilisation Phase.


A Design Guide for E-commerce Websites

If you’re looking to improve your e-commerce page and improve sales, you might want to learn the fundamentals of how to design a good website.

Entrepreneur's Bootcamp

Best Practice Invoicing Tips for SMEs

This article will help Singapore-based SMEs get to grips with the best invoicing practices. Take a look at the tips and how-tos to guide you toward being more streamlined and savvy.


Which Is The Better Payment Gateway: Paypal or Stripe?

As an e-commerce business owner, you would have heard of payment gateways PayPal and Stripe. With these two big platforms being the most popular online payment gateways, you may face a dilemma when it comes to deciding which payment gateway to use.


Tips For Amazon Sellers To Manage Your Inventory Better

Brand owners and sellers of all scales struggle to seek a well-balanced supply chain. Additionally, Amazon has its own inventory management rules, which makes everything even tougher.


Top 10 Best E-commerce Hosting Services in 2021

When you are setting up your e-commerce shop, the right hosting provider can make all the difference. However, with a variety of options out there, choosing the best one can be confusing.


What You Need To Include In An Invoice for E-commerce

For business owners who own and run an online store, you probably already know that invoices must be sent to your customers for the services you provide or the goods you sell, as a form of purchase proof.


Guide to E-commerce Fulfillment & Shipping for Singapore E-commerce Sellers

E-commerce fulfilment and shipping for your Singapore-based business matters. This guide unpacks how the right strategy can influence your bottom line and help you find what’ll work best for you - whether it’s in-house fulfilment, dropshipping or a solid partnership with a 3PL.


E-commerce Tips: How To Use Packaging Inserts to Increase Revenue

Improving customer retention is one of the effective ways to create brand awareness. Additionally, placing your focus on existing customers also means that you do not have to splurge extra dollars on marketing.

Entrepreneur's Bootcamp

The Cost of Living as a Foreign Business Owner in Singapore

When choosing Singapore as a base to run your business is the cost of living, you need to consider the cost of living.


5 Most Lucrative E-Commerce Niches In 2021

If you’re just starting or looking to go in a new direction, finding a lucrative niche will make every part of running your e-commerce business easier. This article will look at the trending e-commerce niches to consider.

Entrepreneur's Bootcamp

How To Pick the Right Company Name

Choosing a business name is not that simple, and you may wreck your brains over choosing one, only to find out that ACRA did not approve its registration.

Tips to run your business smarter. Delivered to you monthly.

You'll receive a verification email you'll have to open and confirm the subscription.

We’re using cookies! What does it mean?