GST Increase in Singapore: What Does the Hike Mean For You?

Singapore Goods and Services Tax will increase in two phases as shared by Finance Minister Lawrence Wong in his maiden budget speech.

Mr Wong said prevailing GST rate of 7% to 8% would be raised on 1st Jan 2023, and 8% to 9%, the full hike, on 1st Jan 2024.

This article gives an overview with GST increase taking place and its background to provide a sense of continuum. More importantly, what the additional GST expenses would be for you in the new environment.

Following events of the trade war since the previous Trump administration, relations between U.S. and China have sunk deeper with angry vitriol. Supply rules changed. So did demand. Along with other international and regional issues, additional GST rate is usually not a popular move.

Daily essentials like food, school fees, vehicle tax and even right down to electronic road pricing charges would creep into your budgets. We provide some contemporary anecdotes for these anticipations in goods and services price increases.

The rationale for increasing GST has been debated for years. The Singapore government has carefully considered and prepared its people and businesses since 2018. In Budget 2018, GST hike was announced to happen between 2021 and 2025. The previous hike was 15 years ago, in 2007 from 5% to 7%.

Like many countries, Singapore’s gross domestic product suffered dips recently. Overall, growth has been relatively stable. As the budgets for healthcare expenditure, climate change, transport and social support services cost increase, the need to raise GST revenue to fund these services kicked into a higher gear.

For citizens, Mr Wong said the government ensures that low-income consumers would get assurance package support. GST Voucher, or GSTV, an initiative across government agencies which started in 2012. The scheme covers four areas: Cash, Medisave, U-Save and S&CC Rebate. We would elaborate on two in this assurance package.

Like many Singaporeans, your eyes may start to widen when the government gives out free money. While this may be correct, you need to fulfil certain criteria as this cash is supposed to go to low- and middle-income Singaporeans.

The keyword to be eligible is low-income. Currently, the threshold is set at $34,000.00 of annual gross salary for the year of Assessment in 2021 for individuals. If you have your name in a property, the annual value (AV) of your property cannot exceed $21,000.00 as of 31st Dec 2021. You also cannot own more than one property.

The cash quantum is a one-time payment ranging from $100.00 to $400.00 for each eligible Singaporean. Full payment in cash payouts would be credited into your bank account.

A cash rebate which goes towards Housing Development Board (HDB) flats. This helps offset utility expenses and comes four times a year.

Criteria to qualify for this rebate covers whether your flat is rented out fully or partially. For example, if your entire HDB flat is rented out, at least one Singaporean must live inside. If your flat is not rented out, you must not have any interest in more than one property. The rebate goes directly to your household SP Services account to offset water and electricity bills.

To further help Singaporean households, Mr Wong said the Singapore government has rolled out additional U-Save rebates which double the amount ranging from $165.00 to $285.00 per household.

Two other GST vouchers support go to Medisave top-ups under Central Providence Funds and Service and Conservancy Charges under Town Councils. Multiple ministries and agencies outsource and provide town councils with duties in maintenance and upkeep for HDB vicinities.

Even with an enhanced assurance package, many Singaporeans and low-income households still feel stretched. This could be due to rising prices from inflation, not just in Singapore but in many countries.

At hawker centres and coffee shops, you are likely to feel the pinch. Many stall holders raise prices to cope. A plate of chicken rice would set you back by $4.00, compared to $3.50 or $3.00 earlier this year. This can be attributed to the shortage of chickens from overseas. Even with supply stabilising, it is possible that you would not get to see prices coming down anytime soon.

With GST increase, some food sellers absorb the hike. For those who can't, the overall price increase is unlikely to be one per cent. A $4.00 plate of food could be jacked up to $4.50. This is a 12.5 per cent increase. Extrapolate this over 30 days, and if you eat out one meal a day, it will cost you $135.00 a month from Jan 2023, compared to $120.00 now. The $15.00 increase over 12 months would translate to $180.00 from 2023.

GST hike affects everyone. From private hire car drivers to polytechnic fees for technical education. Or even getting driving licences to ply the streets. This is where the GSTV Cash initiative comes in handy to minimise the impact from GST rate change. Senior citizens, lower-income households and the less well-off get extra help. Mr Wong said the government also set up a task force as a committee against profiteering.

After GST, this is probably the next tax regime which you need to juggle with. Singapore has a relatively friendly tax system on a personal basis. The income you earn from your jobs, the incentives and commissions, and also the director's fees charged to you can be offset from taxable incomes.

There is also a gender-based system to this tax. For men, due to the requirement to be conscripted for national service, tax deduction can be applied to your income tax. These benefits can even out on the overall GST increase Singapore scenario.

One of the must-haves in Singapore, this is the principal means of wealth tax. And it occupies the top tax revenues for the government.

Owning one property from HDB is usually manageable. The absolute figure against the AV is around 1%. But if you own more than one property, and usually private residential, you would be harder hit with the GST hike.

If you are a GST-registered entity, you need to be geared up for the GST hike of 1% when 1st Jan 2023 kicks in.

First, your accounting system. Your original tax invoice must reflect the change if you have GST-registered businesses. If you are using ABSS software, you would have received notification months ago. If you have missed out, ABSS contact details are available here.

Your accounting system needs to be tweaked and updated with the 8% GST rate change to reflect the products and services prices and price displays in the new tax invoice. With ABSS, re-configuring a new GST rate is simple. Do make sure you upgrade to the latest 8% GST-compliant version. If you need more assistance, our Technical Support Team is happy to assist you.

One module in the accounting system is the Tax Invoice component. The Output Tax on the new tax invoice must comply with the new tax regime. Tax invoices you generate need to be in proper order to avoid unnecessary disruption. In addition, being non-compliant could also result in getting you penalised.

The new GST rate needs to be implemented across other modules seamlessly, such as revenue display, debit and credit note and taking in of services bills, and the Input Tax from suppliers. If you are facing issues with your current accounting system, like a lack of services, there is still time to sort this out. But you must act fast.

With several months before 2023 kicks in, getting quotations, discussing with software vendors, and choosing a suitable platform takes time. Finally, implementing and rolling out accounting software too, requires time.

Besides gathering all the necessary information about your current environment, you need to put in place proper backup and migration plans for your data.

When the backup and migration process is complete, you need to factor in time for the user acceptance test and commissioning of the accounting system, alongside user training. It can take several weeks to months to ensure no potential glitches and iron out any kinks.

Only two things in life are certain, death and taxes. Sounds familiar? Personal income tax, corporate income tax, and property tax are but some taxes to deal with.

Productivity Solutions Grant or PSG is a programme that can help lighten the tax burden and increase revenue. PSG is a grant which gives up to 70 per cent support across all sectors, with an enhanced version of up to 80 per cent for the food services and retail sectors.

The grant is capped at $30,000.00 per fiscal year.

The key objective of PSG is technology adoption.

ABSS is a pre-approved PSG vendor.

Some businesses may still be adamant to make changes in their processes. This can be due to high upfront costs. Many procedures and processes out there may be dated and face a daily grind by workers. The daisy-chain effects from outdated processes can take a toll on businesses.

Often, a simple implementation of technology, such as the ABSS accounting software, may solve your various business problems.

Get a 7 days free trial with our GST Compliant accounting software.

The principle of GST claims on Input Tax has been written widely by ABSS.  In one of our blogs, you get to learn more about GST claims, stay compliant and maximise the benefits to your business.  

The gist of how the upcoming 8% GST rate next year would affect you corresponds to the amount of GST claims you can make from your consumptions. GST hike is an increase on the consumer side of taxes. It is essentially paid for by consumers like yourself.

Organisations and businesses in Singapore which are GST-registered should not be overly worried about the hikes. Ultimately, if you are running a business, you need to be competitive.

If you are running B2C services, like retail, F&B and fashion, there may be a tendency to engage in a price war by taking on the 1% GST increase or completely absorbing it. With GST increase taking place, you may be tempted to make advance payments and make full payments for purchases. Just keep an eye on cash flow.

However, if your business is not GST-registered, you could take on more hits. We covered this subject in one of our blogs.  Here is our guide to GST registration.

With innovation as a centrality of motivation, research and development (R&D) fall nicely in line with government support through taxes. If your business carries out R&D activities in Singapore, the costs to your staff wages and consumables tied to R&D would be eligible for income tax deductions of up to 250%.

This is over and above the GST claims you can tap on. As a business, the fruits from GST claims can make you stronger and share those rewards with your staff.