Singapore GST Rate Increases by Another 1% in 2024

In the country’s 2022 budget, the Minister for Finance announced that the 2% GST rate rise would be staggered over two successive years, from 7% to 8% on January 1, 2023, and from 8% to 9% on January 1, 2024. The Inland Revenue Authority of Singapore (IRAS) has published an e-tax guide online to help smooth the transition of this latest rate change for GST-registered businesses. This latest guide also covers the transitional rules and how to apply reverse charge transactions. Click here to view.

Impacting both consumers and businesses, all GST-registered businesses must have updated their accounting, invoicing and receipt systems by the January 1, 2024 deadline. GST-inclusive prices must also be displayed. The transition period allows some businesses unable to immediately update their displays to exhibit two prices. All price increases should be communicated to consumers transparently. Non-compliance, including discrepancies in financial records, may incur penalty fines.

Transitional rules

For transactions that straddle the January 1, 2024 date, transitional GST rules may be applied. These are determined by one or more of the following events, most notably if the goods have been delivered or services performed partially or fully before January 1, 2024:

• When the supplier invoice was issued
• When the supplier received payment
• The date the goods or performance of services were delivered

To help clarify, the Singapore Government Agency website has published a number of transitional rule and import scenarios. Click here to view. For ease of reference, the five most common GST rate scenarios are:

Scenario 1

Date of invoice:	Before January 1, 2024
Date of payment:	After January 1, 2024
Goods are delivered or services are performed:	After January 1, 2024

A consumer places an order and is invoiced for a product or service before January 1, 2024 but receives it and pays for it after the 9% GST rate increase. The supply would be subject to the 9% GST rate. The supplier may re-issue an invoice to collect the addition 1% GST. Alternatively the cost may be absorbed by the supplier.

Scenario 2

Date of invoice:	Before January 1, 2024
Date of payment:	After January 1, 2024
Goods are delivered or services are performed:	Before January 1, 2024

A consumer places an order and takes delivery of a product or service in late 2023, yet pays for it after 1 January, 2024.  The supplier may elect to apply the transitional rule and charge 8% GST, as the goods were delivered or services performed before January 1, 2024.

Scenario 3

Date of invoice:	Before January 1, 2024
Date of payment:	After January 1, 2024
Goods are delivered or services are performed:	80% before January 1, 2024 and 20% after January 1, 2024

A customer pre-books ten personal training sessions which they are paying for in 2024, but uses eight of the sessions before the end of 2023. They receive the invoice for all 10 sessions on the same day, before January 1, 2024. The supplier may elect for the transitional rule and charge 8% GST on 80% of the gym sessions supplied in 2023. The 20% balance incurs 9% GST. The same would apply if the invoice was issued after January 1, 2024.

Scenario 4

Date of invoice:	After January 1, 2024
Date of payment:	After January 1, 2024
Goods are delivered or services are performed:	Before January 1, 2024

Construction work for a customer is completed before the end of 2023, but the business invoices and requests payment after January 1, 2024.   The construction business may opt to apply the transitional rule and charge the 2023 GST rate of 8%, as the services were completed before January 1, 2024.

Scenario 5 

A customer purchases a kitchen appliance using an interest free payment plan. The deposit and any instalments made before 2024 will be charged at the 2023 8% GST rate; any instalment or balance paid afterward will attract the 2024 9% GST rate. This rule applies to installment payments arranged either directly with suppliers or through banks.

There are of course many more complex GST transactional scenarios. To assist, the IRAS has prepared a number of additional resources, including an e-tax guide, FAQs and a dedicated webpage.

For further information

Mr. Edwin Leow
Director, head of tax
https://www.cla-ts.com/team/mr-edwin-leow/

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