The Goods and Services Tax (GST) in Singapore is very similar to the Value Added Tax (VAT) imposed in most countries. In the 2014 Budget, the Singapore government has left GST almost untouched; mostly thanks to how well it has worked, and kept businesses and individuals happy. Registration for GST falls under two categories: Compulsory and Voluntary. Under certain conditions, it is possible that your business is exempt from registering for GST. However, voluntary registration for GST could be beneficial to your business. Here are 5 reasons why you should register for GST:
Establish a Presence
In a competitive market such as Singapore, establishing your company’s presence can be a big challenge. Big businesses are required to register for GST as their turnover usually puts them in a category where voluntary registration for GST is not an option. Voluntarily registering for GST makes your company look as established as the big players and lets clients know that you mean business. When customers and vendors find out that your business is registered for GST, they automatically make the connection that your company is of a certain size and generates sizable revenue. Regardless of whether your company does brilliantly, the psychological effect on potential clients is not lost.
Shape the Polices Which Affect You
Every time a business registers for GST, the pool from which financial data can be analysed increases. The bigger the pool of data, the better the information can be analysed. This in turn helps the government predict the income tax revenue growth for the foreseeable future and make the relevant policy changes that will ultimately affect your business.
Lower Individual Income Tax Rates
According to the World Economic Forum, one of the main reasons why entrepreneurs find Singapore so appealing is its attractive corporate and personal income tax framework. Lower personal income tax rates can be implemented partly because of GST. The tax revenue growth data collected ensure that the government is aware of the amount of income from corporate tax payments and allows them to keep personal income tax rates as low as possible. Besides, with people paying GST every time they purchase an item, having lower individual income tax rates becomes a lot more viable.
Boosts Savings and Investments
One of the best things about GST is that people are taxed only when the spend on consumer goods and services. Not only does this mean that individual tax rates are lower, but also that savings and investments end up being exempt from any kind of taxation. The growing number of companies registering for GST means that the government has a much more accurate prediction of future revenue. As a result, people are allowed to save and invest their money without the worry that it will be taxed. Since people are already paying GST every time they buy something, it seems only fair that savings and investments be exempt from taxes.
Lower Cost of Administration and Doing Business
In the end, anything that helps save money is a good thing. And that is exactly what registering for GST does. According to Forbes magazine, compared to other tax systems, Singapore’s GST proves to be a very efficient tax system. As a result, not only is it appealing for foreign investors, the cost of administration and collection is a lot lower for the government. Similarly, the cost of doing business is also lowered. With GST, the customer is the one who is the real taxpayer and the business merely acts as a conduit. This means that businesses do not have to bear any tax costs and it makes life a lot easier at the end of the financial year. Voluntary registration for GST does come with its fair share of responsibilities. However, these responsibilities are mostly administrative, and not financial. Considering the short and long term benefits GST registration can offer, the administrative responsibilities it brings along is something that most businesses are more than happy to handle.
Need help with your GST application?
Do you have a export business or you have incur expenses that are greater than revenue or taxable income is more than S$1 million, get your GST registration.