Changes in Standard GST rate wef 1 January 2023
The standard Goods and Services Tax (“GST”) rate in Singapore will be increased on 1 January 2023 and 2024 from the existing 7% to 9% in the following manner:
a. 1 January 2023 – Increase in standard GST rate from 7% to 8%, and
b. 1 January 2024 – Increase in standard GST rate from 8% to 9%.
The first change will be effective on 1 January 2023.
Generally, GST should be charged based on the prevailing GST rate at the time of supply of the goods and services. The time of supply of goods or services (other than a reverse charge supply) is the earlier of the issuance of an invoice or the receipt of payment for the goods or services supplied.
Based on the above time of supply rule, GST should be charged at 7% if payment is received before 1 January 2023.
Under the transitional rules applicable when there is a change of GST rate, if an invoice is issued before 1 January 2023, GST should be charged at 7% only if the goods or services are delivered before 1 January 2023 or if the payment is received before 1 January 2023 (same treatment as above).
Transitional Rules for Charging GST on supplies
There are transitional rules that will apply for GST treatment of transactions when one or more of the following events straddles across the date of change of GST tax rate on 1 January 2023:
a. Supply of goods and services
b. Issuance of invoice
c. Receipt of payment
If invoice is issued before 1 January 2023
If an invoice is issued before 1 January 2023, GST at 7% will be chargeable (compulsory) on the higher of the following amounts:
a. Amount of payment received from customer before 1 January 2023, and
b. Value of goods or services supplied before 1 January 2023.
This will mean that GST should be charged at 7% on the whole supply if an invoice is issued and full payment is received before 1 January 2023, even if the supply of the goods or services are delivered on or after 1 January 2023.
If only partial payment was received or only part of the goods or services are delivered before 1 January 2023, the higher of the two amounts should be charged with GST at 7%. GST at 8% will have to be charged on the remaining amount of the supply, even if the invoice was issued before 1 January 2023.
If the invoice was issued before 1 January 2023 with GST at 7% but:
a. Payment is only received on or after 1 January 2023, and
b. The goods or services are delivered on or after 1 January 2023,
the supplier is required to issue a credit note to cancel the old invoice and issue a new invoice to charge GST at 8% on the amount of the supply that cannot be charged with GST at 7%. For GST purposes, the old invoice ceases to have effect to the extent of the amount of supply on which GST needs to be charged at 8%. The GST charged at 8% must be accounted for in the GST return for the prescribed accounting period in which the earliest of the following events takes place:
a. Date of the new invoice,
b. Date of payment received, or
c. 15 January 2023 (14 days from 1 January 2023).
If invoice is issued after 1 January 2023
Where goods or services are supplied, in whole or in part, before 1 January 2023 but the invoice is issued or any payment is received after that date, businesses may elect for GST to be charged at 7% on the higher of:
a. Amount of payment received before 1 January 2023, and
b. Value of goods are services supplied before 1 January 2023.
This will mean that goods and services supplied before 1 January 2023 may be charged at 7% GST even if the invoice is issued or payment is received on or after 1 January 2023. Similarly, businesses may elect to charge 7% on the amount of payment received before 1 January 2023.
GST at 8% will have to be charged on the remaining amount of the supply that the business cannot elect to charge GST at 7%.
Transitional Rules for GST on Reverse Charges
GST on reverse charges arising from Distantly Taxable Goods (DTGs) and imported services are to be accounted for when the reverse charge supply to the recipient is considered to have taken place. The supply is considered to have taken place on the earlier of the following events:
a. When the invoice is issued by the supplier, and
b. When the recipient of the DTGs or imported services pays any consideration for the supplies.
Alternatively, if the recipient of the DTGs or imported services is GST registered, the recipient of the DTGs or imported services may treat the reverse charge supplies as taking place at the earlier of:
a. Date on which the supply is entered into the accounts or other records of the recipient, and
b. Date of payment of the consideration by the recipient.
If the above alternative treatment is adopted and the date of entry into the accounts or other records is the earlier date for reverse change supply, the recipient must account for GST at 8% on the reverse charge supply in the appropriate GST reporting period (prescribed accounting period). If the date of payment of the consideration is the earlier date, the recipient needs to account for GST prevailing at the date of payment.
For retail businesses, price displays must be inclusive of GST at 8% with effect from 1 January 2023. Businesses may choose to display 2 prices – one applicable before 1 January 2023 with GST at 7% and another one applicable on or after 1 January 2023 with GST at 8%. For businesses that intend to switch their price displays on 1 January 2023, they are also advised to indicate to customers that their prices may change on 1 January 2023.
GST changes for Travel Agents wef 1 January 2023
With effect from 1 January 2023, the GST treatment of services provided by travel agents arranging for international transport, accommodation and insurance will no longer depend on the nature of the underlying travel products. Instead, the GST treatment will depend on where the party to the contract and direct beneficiary of the services belong.
From 1 January 2023, travel arranging services will qualify for zero-rating only if the services are:
a. contractually supplied to an overseas person; and
b. directly benefiting an overseas person who is outside Singapore at the time the services are performed, or a GST-registered person belonging in Singapore.
As such, travel arrangement services provided by travel agents to persons belonging in Singapore or which directly benefits a local person who is not GST-registered will be subject to GST at the prevailing rate with effect from 1 January 2023.
The above information provides a simplified overview of GST rate and other GST changes that may apply to more common scenarios for most businesses. The information has been simplified and may not apply to all circumstances. Our Accounting & GST group will be able to assist you with any issues arising from the changes. Let us know if you have any specific areas of concern in which we may be of assistance to you. We will be able to assist clients on their specific circumstances with detailed review of specific transactions and scenarios. We may, however, not be able to provide comprehensive explanations of all the prevailing rules and regulations without application to actual transactions.
Wee Kong Eng
Lee Hui Min
Wee Kong Eng
Public Accountant, Tax & GST Professional
Master of Taxation, CA (Singapore), CIA, Dip. in Law, ATP (Income tax & GST), Assoc CVA
K E Wee & Associates PAC, Public Accountants and Chartered Accountants
Disclaimer and limitations
The above information is updated as of 30 November 2022 and may be subject to change. Information may have been summarized, simplified or paraphrased for easier understanding and to suit scenarios more commonly applicable to client companies. It is not meant to be a comprehensive guide or substitute for professional advice. All opinions or interpretations are solely those of ourselves and our partner firms and may be subject to agreement by the relevant authorities. While effort has been made to ensure the accuracy of the above information, we shall not be liable for loss arising directly or indirectly from any inaccuracy or omission in the information provided.