In the 2022 budget announcement, Singapore’s Minister for Finance announced the GST rate will increase from 7% to 8% on 1 January 2023, and from 8% to 9% on 1 January 2024. This change will impact all Singapore businesses that file GST.
Checklist for systems and processes - what do I need to consider?
Here are some things to consider in preparation for a GST rate increase:
- Review and make adjustments to your point of sales, invoicing, procurement and accounting systems to incorporate the new GST rate transitional timing rules;
- Update price displays (where applicable - i.e. menu or website)
- Train your staff on the implications of a GST rate increase
- Review any contracts that might be impacted by a GST rate change.
- Informed your customers of the GST increase (For example, you may wish to state in your advertisements, websites and brochures that GST would be charged at the rate prevailing at the time of supply)
Timing considerations for you and your customers
Payment date matters
Generally, purchases of goods and services from GST-registered businesses before 1 Jan 2023 will be subject to GST at 7%, and purchases on/after 1 Jan 2023 will be subject to GST at 8%.
For your customers, there may be some situations where they order an item or sign up for services but only pay at a later date. WHEN they pay for the goods and services will determine which GST rate will be charged.
For transactions that span 1 Jan 2023, GST transitional rules may apply. A transaction spans the GST rate change where one or more of the following events takes place wholly or partially on/after 1 Jan 2023:
- The issuance of invoice
- The receipt of payment
- The delivery of goods or performance of services
In general, if the invoice date and payment date are before 1 Jan 2023, but the delivery of goods or services is on/after 1 Jan 2023, GST will be charged at 7%.
If the invoice date is before 1 Jan 2023, but the payment and delivery of goods or services is on/after 1 Jan 2023, GST will be charged at 8%.
1. I am an advertising agency and I invoice my customer on 1 Dec 2022 with 7% GST charged for a media campaign due to run from 20-27 Jan 2023. My customer makes payment on 31 Dec 2022, and the media campaign is successfully delivered as agreed from 20-27 Jan 2023.
As the invoice was issued before 1 Jan 2023 and payment was received before 1 Jan 2023, GST of 7% will be charged even though the service is delivered after 1 Jan 2023.
2. I am a music school my student books their next lesson on 28 Dec 2022. Their lesson is scheduled for 5 Jan 2023. I invoice them with 7% GST charged on the day they made booking - 28 Dec 2022. The student makes payment on the same day as their lesson - 5 Jan 2023.
GST is to be charged at 8% on services performed on/after 1 Jan 2023 even though the invoice was issued before 31 Dec 2022. You may issue a credit note to cancel the original tax invoice with 7% GST charged by 15 Jan 2023, and issue a new tax invoice with 8% GST charged. Alternatively, you may choose to absorb the additional 1% GST and no additional GST will be collected from you.
3. I am a wedding planner and a client books a hotel package on 21 Dec 2022. The wedding is to be held in 2023. The price of the package is $8,000 excluding GST. The client pays a deposit of $1,070 ($1,000 + $70 GST at 7%) on 28 Dec 2022, with the balance to be paid on 5 Mar 2023.
GST is charged at 7% on payment made before 1 Jan 2023 and at 8% on payment made after 1 Jan 2023. In this case, 8% GST is chargeable on the remaining unpaid balance of $7,000 (GST-exclusive). Hence, the client will need to pay $7,560 on 5 Mar 2023 ($7,000 + $560 GST at 8%).
What about my accounting system?
If you’re a GST registered business and already a client with Harvest, you are currently on Xero, and we’ve got you covered.
From 9 Dec 2022, Xero has released new 8% rates settings for you to prepare 8% invoices ahead of time and get ready for the upcoming transition.
We’ll also be making changes in the accounts and checking all relevant areas in Xero are updated to ensure a smooth transition to 8%.
If you invoice out of other POS systems and not Xero, want to discuss transitional timing rules, or have any other questions around the GST rate increase, please do not hesitate to reach out to the team at Harvest Accounting.