2024 Singapore GST Rate Change Transitional Rules

As of January 1, 2024, the Goods and Services Tax (GST) rate has been increased from 8% to 9% in Singapore, as outlined by the Minister for Finance in Budget 2022. This two-step adjustment began with an initial rise from 7% to 8% on January 1, 2023.

In preparation for this change, businesses must understand the transitional rules governing transactions during this period of rate adjustment.

This guide aims to clarify these regulations, ensuring businesses can navigate the transition effectively while remaining compliant with GST requirements.

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Transitional Rules for Rate Change

A transaction encompasses a GST rate change from 8% to 9% if one or both of the following events happen wholly or partly on or after January 1, 2024:

(i) the creation of an invoice;
(ii) the receipt or initiation of payment for a reverse charge supply; and the dispatch of goods or completion of services (referred to as “Basic Tax Point” here).

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Transitional Rules for Supplies Where the Invoice is Issued On/After January 1, 2024

Here are the conditions, along with examples for the following scenarios:

Full Payment Received Before Rate Change:
Condition: If the invoice for the supply is issued on or after January 1, 2024, but full payment is received in 2023, the supply is subject to GST at 8%, regardless of when the Basic Tax Point of the supply occurs.

Example:

• Scenario: Invoice issued on January 1, 2024, but full payment received on December 12, 2023.
• Explanation: Even though the invoice is issued after the rate change, since full payment is received before the change, GST is charged at 8%.

Full Payment Received On or After Rate Change:

Condition: If both the invoice and full payment for the supply are issued and received on or after January 1, 2024, the time of supply will be triggered after the rate change, subjecting the supply to GST at 9%, unless certain conditions are met.

Example:

• Scenario: Invoice issued and full payment received on January 4, 2024.
• Explanation: Since both the invoice and full payment are made after the rate change, GST is charged at 9% by default.

Exception Condition:

If the Basic Tax Point of the supply takes place in 2023, the GST-registered supplier can elect to charge GST at 8% on the value of goods or services delivered/performed in 2023. The remaining value of the supply will be subject to GST at 9%.

Example:

• Scenario: Basic Tax Point occurs before the rate change on January 1, 2024, goods delivered on January 3, 2024, and full payment received on January 8, 2024.
• Explanation: Even though the time of supply occurs after the rate change since the goods are fully delivered in 2023, the supplier can elect to charge GST at 8% for the entire value of the supply.

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Payments That Straddle Rate Change

Here’s a breakdown of different scenarios on how payments interact with changes in GST rates and their implications:

1. Part Payment Before Rate Change:
   If you receive part of the payment before the rate change and the remaining part after, you’ll apply 8% GST on the amount received before the change and 9% on the amount received after.
2. Part Payment Spanning the Rate Change:
   If payments straddle the rate change, you’ll apply 8% GST on the part received before January 1, 2024, and 9% on the part received on or after that date.
3. Basic Tax Point Before the Rate Change:
   If the Basic Tax Point occurs before the rate change, you can choose to charge 8% GST on the higher of the payment received in 2023 or the value of goods/services delivered in 2023, with the remaining value subject to 9%.
4. Basic Tax Point After the Rate Change:
   If the Basic Tax Point occurs after the rate change, you’ll apply 8% GST on the part received before January 1, 2024, and 9% on the part received on or after that date.
5. Basic Tax Point Spanning the Rate Change:
   If the Basic Tax Point straddles the rate change, you can choose to charge 8% GST on the higher of the payment received in 2023 or the value of goods/services delivered in 2023, with the remaining value subject to 9%.

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Making an Election for Supplies that Span the Date of Rate Change

In certain circumstances, GST-registered suppliers have the option to elect to charge GST at 8% on taxable supplies that span the rate change on January 1, 2024. This election is subject to specific conditions and requirements outlined below.

In certain circumstances, GST-registered suppliers have the option to elect to charge GST at 8% on taxable supplies that span the rate change on January 1, 2024. This election is subject to specific conditions and requirements outlined below.

Example:

Scenario: Services performed worth S$1,000 on December 20, 2023. Tax invoice issued on January 4, 2024, charging GST at 9%. Election made to charge 8% GST.

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Transitional Rules for Supplies with 2023

In situations where invoices are issued in 2023, transitional rules govern the application of GST rates. Here’s a concise breakdown:

Examples:

1. Scenario: Tax invoice issued on December 1, 2023. Full payment received before rate change.
   • Action: Charge and account for GST at 8% on the invoice.
2. Scenario: Tax invoice issued on December 20, 2023. Full payment was received on January 20, 2024.
   • Action: Issue a credit note and new tax invoice by January 15, 2024, for the part subject to 9% GST.
3. Scenario: Tax invoice issued on December 20, 2023. Goods delivered after rate change.
   • Action: Charge GST at 8% on the invoice. Issue a credit note and new tax invoice for the part delivered after the rate change by January 15, 2024.

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Transitional Rules for Special Situations

1. Continuous Supplies
   • Definition: Continuous supplies include licenses, leases, power, construction services, and subscription-based services.
   • Time of Supply: For continuous supplies, GST is charged based on when the invoice is issued or payment is received.
   • Transitional Rules: Apply transitional rules if the supply spans the rate change. Know the delivery/performance date along with invoice/payment dates.
   • Example 1: Utility invoice issued on January 1, 2024. Full payment received on January 12, 2024. Can elect to charge 8% GST as utilities were supplied before January 1, 2024.
   • Example 2: Maintenance invoice issued on December 10, 2023. Part payment received on December 15, 2023. Charge 8% GST on the invoice. Issue credit note and new tax invoice by January 15, 2024, for part payment received after January 1, 2024.
2. Goods Put to Private Use
   • Definition: Using business goods for private purposes without payment is a “deemed supply.”
   • Time of Supply: Deemed supply time is the last day of the accounting period when goods are used for private purposes.
   • Transitional Rules: Elect to account for output tax at 8% if goods are used before January 1, 2024. Maintain evidence of usage.
   • Example 1: Goods taken for private use on December 20, 2023. The deemed supply’s time is January 31, 2024. Can elect to charge output tax at 8% since goods were used before January 1, 2024.
3. Time of Supply Before/After GST Registration
   • General Rule: If time of supply occurs before GST registration or after de-registration, it’s outside GST scope.
   • Examples: No GST if invoice issued before registration or after de-registration.
4. Supplies Spanning GST Registration
   • Scenario: If GST-registered after January 1, 2024, transitional rules don’t apply. GST at 9% upon invoice issuance.
   • Customer Request: If Basic Tax Point before registration, the customer can request no GST on part delivered before registration.
5. Supplies Spanning GST De-registration
   • De-Registration: If de-registered before January 1, 2024, transitional rules don’t apply.
   • Output Tax: If Basic Tax Point before de-registration, account for GST on remaining supply at the rate before de-registration.

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For Reverse Charge (RC) Businesses

1. Invoice Issued on or after 1 Jan 2024:
   • If full payment is made in 2023, reverse charge applies at 8% GST.
   • If full payment was not made in 2023 and part or all services are performed before 1 Jan 2024, you can elect to apply 8% GST on the higher of
     • (a) Payment made in 2023, or
     • (b) Value of services performed in 2023.
   • Remaining value of supply is subject to 9% GST.

   Example

   • You receive imported services in Dec 2023, with an invoice issued in Jan 2024.
   • If you make full payment in Jan 2024, a normal reverse charge at 9% applies.
     However, if you elect, you can apply 8% GST for services performed in 2023.
2. Invoice Issued in 2023:
   • If full payment is made in 2023 or services are fully performed in 2023, a reverse charge applies at 8% GST.
   • Otherwise, 9% GST applies on the lower of:
     • (a) Payment made on/after 1 Jan 2024, or
     • (b) Value of services performed on/after 1 Jan 2024.
3. When to Account for Additional Output Tax:
   • Additional output tax should be accounted for:
     1. When payment for the part of the supply is made, or
     2. By 15 Jan 2024.
4. Example:
   • Invoice issued in Dec 2023, part of services performed in Dec 2023.
   • Account for GST at 8% on the invoice amount in the period of invoice issuance.
   • Transitional rule: Account for 9% GST on the lower of payment made or services performed on/after 1 Jan 2024.
5. For RC Transactions Based on Posting Date:
   • Transitional rules depend on the posting date instead of the invoice date.

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Conclusion

The transitional rules for GST rate change provide a structured framework for businesses to manage their tax obligations effectively during the transition period. By understanding and adhering to these rules, businesses can ensure compliance with regulatory requirements while minimising potential disruptions to their operations.

We at Rikvin can provide invaluable assistance to businesses navigating the complexities of GST rate changes. Our expert advisors offer tailored guidance on understanding the transitional rules, documenting necessary evidence, and implementing required adjustments.

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