2024 GST Rate Change – 11 Common Questions Asked

Singapore implemented its second GST rate change on 1st January 2024, and the transition from an 8% GST rate to a 9% rate posed several questions and considerations for businesses. In this blog post, we will address some of the most common questions surrounding this GST rate change and provide insights on how to navigate them effectively.

1. What are the transitional guidelines for transactions?

The GST rate for transactions spanning a rate hike is determined by the payment date or the date of services performed/goods delivered, rather than the invoice date (or posting date in the respect of a reverse charge).

2. How Should I Calculate GST for Services Paid via Credit Card with Instalment Arrangements?

Suppose your business provides training courses, and a customer registers and pays the full course fees via credit card on 15th December 2023, with the course scheduled to commence on or after 1st January 2024. In this case, the time of supply is considered to be on 15th December 2023 when you receive full payment from the customer’s bank. Therefore, you should charge 8% GST on the supply.

As a concession, if the full payment for the course fees was charged to the credit card in 2023, even if the payment is received from the customer’s bank on or after 1st January 2024, you can treat the payment as received before 1st January 2024 and charge 8% GST on the supply.

3. What GST Rate Should Be Applied to Imported Goods Due to Arrive in Singapore on/after 1st January 2024?

For goods imported into Singapore on or after 1st January 2024, the Singapore Customs will collect GST at the new rate of 9%. It’s essential to be aware of this change and ensure proper compliance with customs procedures and payments.

4. How Should GST Adjustments Be Made for Goods Supplied and Returned 2 to 3 Years After the Rate Change?

In cases where goods were supplied and delivered before the GST rate change and are returned 2 to 3 years later, the GST adjustments should be made based on the rate originally charged and accounted for. For example, if goods were supplied with a 7% GST rate in 2022 and are returned in 2024, credit notes should be issued to adjust the GST at 7%.

5. What Documentation Should I Maintain to Prove That Services Were Completed Before 1st January 2024?

To support that services were completed before 1st January 2024, it’s crucial to maintain proper documentary evidence. Examples of such evidence include acceptance or confirmation of services received by customers. The specific type of documentation may vary depending on the basis of your apportionment. It could include time sheets, cost statements, or certifications of work done issued by relevant professionals. If you encounter difficulties determining the appropriate method of apportionment, consider seeking clarifications from the Comptroller of GST.

6. How Should GST Adjustments Be Made for Invoices Issued After Full/Partial Performance of Services or Goods Delivery?

a) Completion of Services/Full Delivery of Goods Before 1st January 2024:

• Businesses can either issue a tax invoice at the 9% GST rate on the full invoice amount or elect to issue a tax invoice at 7% GST on 40% of services performed/goods delivered in 2022 and 8% on the remaining 60% in 2023.

b) Partial Completion of Services/Partial Delivery of Goods Before 1st January 2024:

• In this scenario, as the tax invoice is issued in 2023, the prevailing GST rate of 8% should apply, and businesses should account for output tax at 8% GST rate. However, businesses have the option to charge 7% GST on the value of services performed/goods delivered in 2022.
• Businesses should take the following steps by 31 March 2024:
  • Issue a credit note for the remaining value of services performed or goods delivered on or after 1 January 2024.
  • Issue a new tax invoice to reflect the 9% GST rate for the remaining value of services performed or goods delivered on or after 1 January 2024.

7. How Does the GST Rate Increase Impact My Pricing Approach?

While GST-registered businesses must adjust their GST reporting to reflect the new rate after a hike, it doesn’t automatically translate to passing on additional GST costs to customers. It’s crucial to assess your customer base and their sensitivity to price changes, especially if they aren’t GST-registered and can’t recover the charged GST. This evaluation will influence whether you choose to absorb the entire GST hike or pass it on partially to customers, impacting your bottom line accordingly.

8. Are there any GST relief schemes available?

Certainly, initiatives such as the Major Exporter Scheme and Zero-GST Warehouse Scheme are available to aid businesses in cash flow management and mitigating the effects of the GST hike.

9. If my company buys a gift valued at more than S$200 in 2023 but decides to give it away on or after January 1, 2024, what GST rate should I consider for calculating the output tax?

You should calculate the deemed output tax on the gift at the rate of 9% since it is being given away on or after January 1, 2024. If you opt not to claim input tax for the GST incurred on the gift, there is no need to account for output tax when you distribute it.

10. What Should I Do with Marketing Materials Showing 8% GST Prices on 1st January 2024?

If you still have marketing brochures displaying prices inclusive of the 8% GST on 1st January 2024 and it’s not cost-effective to dispose of them, you can take the following steps:

• Stamp a statement on all brochures indicating that prices will be adjusted to include GST at 9% from 1st January 2024.
• Alternatively, if recalling brochures is not feasible, display prominent signs to inform customers of the upcoming price adjustment to accommodate the 9% GST rate.

11. Should I Voluntarily Register for GST?

Whether or not to voluntarily register for GST is a decision that businesses should consider carefully. Voluntarily registered businesses must remain registered for at least two years. Factors to weigh include the responsibilities of being GST-registered, the profiles of your suppliers and customers, and how price increases due to GST might affect your customer base. Evaluating costs and benefits over the next two years is essential in making an informed decision.

Summary

Navigating the GST rate change in Singapore in 2024 requires a clear understanding of the transitional rules and proper compliance. These common questions shed light on various aspects of the transition, but it’s essential to seek professional advice for specific situations.

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