Pros & Cons Of Voluntary GST Registration
Author: Kenneth ([email protected])
Published: Tuesday March 16, 2021
What is GST in Singapore?
Goods and Services Tax, or better known as GST, is a general consumption tax that is levied on imported goods, as well as goods and services supplied in Singapore. GST is the equivalent of Value-Added Tax, or VAT, in other countries.
While everyone has common knowledge about GST as a consumer, business owners, especially new entrepreneurs, may wonder if they have to be GST registered, or if there might be any obligations or benefits that might come along with being a GST registered company.
According to IRAS, it is compulsory for a business to register for GST when its annual taxable supplies exceed $1 million, or if its expected taxable turnover in the following 12 months is foreseen to exceed $1 million. Businesses that do not fulfill these criteria are not required to register for GST, but they are nonetheless not forbidden from voluntarily registering for GST.
Pros & Cons Of Voluntary GST Registration:
- Businesses will be able to claim the GST (7%) that they have paid on business purchases used to make taxable supplies (i.e., input tax).
- Once a business is registered for GST, it would no longer have to worry about or constantly check if it is exceeding the threshold of S$1 million for compulsory registration of GST.
- Since most large and established businesses are GST registered, having one’s business to be GST registered can instil in the customers an impression that the business is established and of a certain magnitude.
- Being GST registered brings about additional administrative workload because there are duties and responsibilities that a GST registered business will be obligated to fulfil.
- Business owners will have to take out time and expend effort to understand how GST works. They need to display GST prices and more meticulous accounting done. They might have to hire an accountant and buy accounting software are some reasons small businesses do not volunteer.
- Increased selling prices (by 7%) due to GST registration may prove to be disadvantageous to growing businesses if many of their suppliers are not GST registered and are unable to recover the GST that they have been charged with.