Singapore has increased its goods and services tax (GST) rate by one percent to nine percent as of January 1, 2024.
GST is a value-added tax levied on most supplies of goods and services as well as on imported goods.
Why is Singapore increasing its GST levy?
Singapore announced planned GST increases during the 2022 budget with the rate raised in two steps, from seven to eight percent in 2023, and eight to nine percent in 2024. The revenue received from the increase in GST will be used to cover the country’s medium-term needs.
The steady tax increase showcases Singapore’s need to shore up its tax revenue base, especially as healthcare costs continue to rise in the city-state. The government designated an estimated US$12 billion for healthcare in the 2023 budget, triple to what was designated 10 years ago. Further, Singapore is expected to spend S$59 billion (US$44.7 billion) on healthcare by 2030.
An aging population
Singapore’s healthcare expenditure is rising significantly due to its rapidly aging population. Today, 1 in 7 Singaporeans are aged 65 and above. By 2030, this is expected to be 1 in 40, or approximately one-quarter of the population.
How should GST-registered businesses prepare for the increase?
GST-registered businesses are advised to prepare as soon as possible for the upcoming rate change. Some areas that businesses should address include:
- Updating their accounting and invoicing systems to accommodate for the new GST rate;
- Updating any pricing schedules made available to customers and the public, such as on websites;
- Updating their cash register systems;
- Review contracts and agreements with suppliers or customers to accommodate the new rate;
- Equip employees with the relevant GST knowledge so that they are aware of its impact; and/or
- Seek the help of professional advisors who can assist in applying for any relevant GST schemes from the government.
