Tax
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Are you ready for the Goods and Service Tax (GST) rate changes from 2023?
In the Singapore 2022 budget statement, the Minister for Finance announced that the Goods and Service Tax (GST) rate will be raised under two trenches:
1. Increase from 7% to 8% with effect from 1 Jan 2023; and
2. 8% to 9% with effect from 1 Jan 2024.
1. Increase from 7% to 8% with effect from 1 Jan 2023; and
2. 8% to 9% with effect from 1 Jan 2024.
What are the consequences for your business?
There are 3 main things to take note of:
1. System changes to incorporate the new rate
Business should ensure that its business systems are able to implement the GST changes from 1 January 2023. Some examples of systems include the receipting systems for point-of-sales (POS) billing, accounting systems, invoicing systems, retail management systems. It is apt to check in with the Company’s in-house IT team or software vendors for a smooth transition.
2. Price displays to reflect the new GST rate
All price displays should be inclusive of GST at 8% with effect from 1 Jan 2023, 12 a.m. If you are unable to change your price displays overnight, you may display two prices:
- Prices inclusive of GST at 7% applicable before 1 Jan 2023.
- Prices inclusive of GST at 8% with effect from 1 Jan 2023.
3. Transitional rules for GST rate changes
GST should be charged at the prevailing rate based on the time of supply rules. If the time of supply occurs before 1 Jan 2023, you have to charge GST at 7%. If the time of supply occurs on or after 1 Jan 2023, the GST rate of 8% will apply.
For supplies straddling the date of GST rate change, you will need to consider the transitional rules to determine whether to charge GST at 8% or 7%, i.e., the time of delivery of goods or performance of services (“Basic Tax Point”) in addition to the general time of supply rules.
For illustrations, we have provided below some scenarios on certain billing arrangements:
Scenario 1: Invoice is issued, and full payment is received before 1 January 2023
No adjustment to the 7% GST rate as full payment is received before 1 January 2023.
Scenario 2: Invoice is issued before 1 January 2023, but payment is not received before 1 January 2023
7% GST may apply to the value of goods delivered or the services performed before 1 January 2023 and 8% GST will apply on the value of the goods delivered or the services performed on or after 1 January 2023.
Credit notes, where required, to make adjustments for the GST charged should be issued by 15 January 2023.
You do not need to seek prior approval from IRAS when you make an election for your supply. However, you should maintain the documentary evidence to show that the goods are delivered before the rate change.
How can Mazars help?
It is always apt for businesses to prepare early to adhere to the rules and regulations set by the IRAS. Some of the issues businesses may face includes transitional rules in terms of issuing invoices, contractual related issues and other changes to GST regulations from 2023. At Mazars, we are able to provide you with solutions that businesses may face as they transit from 7% to 8% GST rate from 2023. Please feel free to contact us for a preliminary discussion.
Our experts
Elaine Chow Partner, Tax
