Increase In GST From 7% to 8%
Effective 1 January 2023
As announced by the Minister of Finance in Budget 2022, GST will be increased from 7% to 9%. This increase will be staggered over 2 steps:
(i) from 7% to 8% from 1 Jan 2023; and
(ii) from 8% to 9% from 1 Jan 2024.
To help the Company prepare for the first-rate change from 7% to 8%, which takes effect from 1 Jan 2023, please find the following general pointers.
(1) Tax Invoices Issued Before 1 Jan 2023
Tax invoices issued before 1 Jan 2023 must reflect GST at 7%.
The Company is not allowed to charge GST at 8% in such cases. However, the Company may include a note on the tax invoice that GST will increase to 8% from 1 Jan 2023.
(2) Payments Received Before 1 Jan 2023
The Company is also not allowed to charge GST at 8% on payments that are received before 1 Jan 2023. This is regardless that the services would be performed or goods delivered only after 31 Dec 2022.
(3) Tax Invoices Issued On/After 1 Jan 2023
For tax invoices issued on or after 1 Jan 2023, GST needs to be charged at 8%, except where full payments were received before 1 Jan 2023 wherein GST should be chargeable at 7% (as discussed in (2) above).
However, the Company may elect to charge GST at 7% in qualifying situations where services were performed / goods delivered by 31 Dec 2022. In such cases, the Company may elect to charge GST at 7% on the value of goods delivered or services performed before 1 Jan 2023. The remaining value of the supply will still be subject to GST at 8%.
In addition, should your customers request for GST to be charged at 7% in the above qualifying situations, you would need to issue a credit note and re-issue a new tax invoice for GST at 7%. The timeline for the credit note and new tax invoice is 90 days from the date of the original invoice.
(4) Unpaid Tax Invoices at End of 31 Dec 2022
The Company should review all tax invoices that are unpaid at end of 31 Dec 2022.
If these unpaid invoices relate to services that were not performed / goods not delivered by end of 31 Dec 2022, the Company may need to issue a credit note and a new tax invoice to reflect the new GST rate of 8% accordingly. The due date to issue the credit note and new tax invoice is 15 Jan 2023.
(5) Price Displays On or After 1 Jan 2023
With the exception of hotels and food & beverage establishments that impose a service charge, all price displays must show prices inclusive of GST. Hence, with effect from 1 Jan 2023, all price displays must be inclusive of the new GST rate of 8%.
The Company may also display 2 prices:
(a) one inclusive of 7% GST applicable before 1 Jan 2023; and
(b) one inclusive of 8% GST applicable from 1 Jan 2023.
For hotels and food & beverage establishments that impose a service charge, they are not required to display GST-inclusive prices to ease operations. However, they are still required to display a prominent statement to customers that prices displayed are subject to GST and service charge.
(6) Other Administrative Matters
In addition to the above, please also note the following:
(i) the Company’s accounting and invoicing systems should be duly updated to incorporate the new GST rate;
(ii) where applicable, all cash registers and receipting systems (e.g., Point-of-Sales Systems) should be updated to reflect the appropriate GST rate;
(iii) all pricing displays should meet the requirements specified by IRAS with respect to the rate change as discussed above;
(iv) staff are appropriately trained on the transitional rules for the rate change and to apply the correct GST rate accordingly;
(v) customers are duly informed of the increase in GST; and
(vi) the Company’s contracts and agreements are reviewed for the change in GST rate and the relative obligations of each party accordingly.
With respect to the above rate change, if you need further information or advice on specific scenarios, in particular on transactions that straddle the rate change period, please do not hesitate to reach out to your Relationship Manager who would be pleased to assist.
Separately, with effect from 1 Jan 2020, certain businesses, (“RC businesses”), are required to charge GST on the import of services from overseas suppliers. With effect from 1 Jan 2023, this is further extended to the import of low-value goods.
To find out more about reverse charge mechanisms and if your business is a RC business, please do not hesitate to reach out to your Relationship Manager.