In Singapore, Goods and Services Tax (GST) registration is compulsory for a person or corporation that has a total taxable turnover exceeding S$1 million and fulfills one of three views: retrospective view, prospective view, or reverse charge and overseas vendor registration.
It is essential to compute the taxable turnover correctly according to guidelines for each type of business entity (ie. sole proprietors, partnerships and companies), as there are a number of implications and responsibilities that come with being GST registered.
This article focuses on how taxable turnover is calculated for sole proprietors, partnerships and companies.
What is taxable turnover?
Taxable turnover refers to the total value of all taxable supplies made in Singapore. This value is calculated excluding the GST amount.
Taxable turnover value includes the value of all standard-rated (7 percent) and zero-rated supplies but excludes exempt supplies and out-of-scope supplies.
How to calculate taxable turnover
The GST registration process differs slightly depending on the type of registration and constitution of your business.
Computing taxable turnover for sole-proprietorships
A sole-proprietorship is a business owned by one person or one company. As a sole-proprietor, you have to add up the taxable turnover of all your sole-proprietorship businesses to determine whether they exceed S$1 million.
The key principle for the sole-proprietorship category is to combine the turnover of all income from:
- The person’s income derived from a trade, profession or vocation such as agent commissions, freelance work, multi-level marketing, consultation service, Grab car driving, and so on;
- The person’s income derived from sole-proprietorship businesses.
GST registration for sole-proprietorship
The registration should be in the name of the person, i.e. sole-proprietor. All sole-proprietorship businesses under this person’s name will thus be GST-registered.
Taxable income from any future business set up by this person will automatically be included. Below is an example to illustrate this.
EXAMPLE
Name of sole-proprietor: Andy Tan
Personal income derived from: taxi driving on a part-time basis (GST taxable service)
Sole-proprietorship business income from: Business A and Business B (assuming all the goods and services rendered are GST taxable supplies)
Income from the past 12 months:
– Personal income = S$30,000
– Business A turnover = S$500,000
– Business B turnover = S$490,000
Calculation for business turnover over 12-month period:-
= Business A + Business B + personal income
= S$500,000 + S$490,000 + S$30,000
= S$1,020,000
The combined taxable turnover exceeds S$1 million in 12 months. Andy Tan must register for GST immediately, especially if he can reasonably expect his total turnover to exceed this amount in the next 12 months.
Computing taxable turnover for partnerships
The principle for calculating the turnover for this category is by combining the turnover of all partnership businesses with the same composition of partners.
GST registration for partnerships
Each partnership business must separately register under the name of respective partnership. Once that is done, all businesses with the same composition of partners need to be GST-registered. This includes those which may be set up in the future with the same composition of partners.
Here are examples to illustrate two different scenarios for this category.
SCENARIO 1
(Assumption: all the goods and services rendered are GST taxable supplies)
Business C: business partners are Raslan and Mariam
Business D: business partners are Raslan and Mariam
Business E: business partners are Raslan and John
Turnover for businesses in the past 12 months:
- Business C = S$200,000
- Business D = S$300,000
- Business E = S$600,000
Calculation for Raslan’s business turnover (partnership with Mariam):-
= Business C + Business D
= S$200,000 + S$300,000
= S$500,000
Calculation for Raslan’s business turnover (partnership with John):-
= Business E
= S$600,000
Combined turnover for the two sets of partnerships is less than S$1 million each in 12 months. There is no need for the partnership business to register for GST unless the projected turnover in the next 12 months exceeds S$1 million.
SCENARIO 2
(Assumption: all the goods and services rendered are GST taxable supplies)
Devi and Mary are partners in two businesses – Business F and Business G.
The turnover for the businesses in the past 12 months:
- Business F = S$500,000
- Business G = S$600,000
Each business must be GST-registered under its own business GST registration number. GST returns must also be filed separately.
SCENARIO 3
(Assumption: all the goods and services rendered are GST taxable supplies)
Business C: business partners are Raslan and Mariam
Business D: business partners are Raslan and Mariam
Business H: business partners are Raslan, Mariam and Wong
Turnover for businesses in the past 12 months:
- Business C = S$200,000
- Business D = S$300,000
- Business H = S$600,000
Calculation for turnover: Businesses C and D have the same partners so the calculation combines turnover for these two businesses. Raslan and Mariam may be partners in Business H but Wong does not have any partnership in Businesses C and D. Therefore, calculation for Business H is considered a separate one.
Computing taxable turnover for companies
GST registration for a company will be under its name. The turnover of the company should be computed on its own even though it may share the same shareholder with another company.
However, if it owns any sole-proprietorship businesses, the turnover of these sole-proprietorship businesses must be included in the total turnover calculation.
Here is an example to illustrate this.
EXAMPLE
Let’s assume that you are the director of Private Limited Company A, which trades goods in Singapore. You are also a director of Private Limited Company B of which Sole-proprietorship Business Y is a subsidiary.
Total turnover of each company in the past 12 months:
- Private Limited Company A = S$900,000
- Private Limited Company B = S$500,500
- Sole-proprietorship Business Y = S$500,000
Calculation for turnover:
- Private Limited Company A = S$900,000 (it need not register for GST if its turnover for the next 12 months is not expected to exceed S$1 million)
- Private Limited Company B = S$500,500 + S$500,000 = S$1,000,500
(it exceeds S$1 million so it must be registered for GST immediately if it expects total turnover to exceed S$1 million in the next 12 months)
Wrap up
The tracking and billing of GST in daily business activities can be a time-consuming affair. That is why many businesses outsource to corporate service providers such as Intime Accounting.
At Intime Accounting, we have a dedicated team to offer corporate tax services as well as bookkeeping and accounting services. By outsourcing accounting and corporate tax needs to us, your company can focus on your core business activities.
Our core business activities are bookkeeping and accounting as well as corporate tax. As such, we are able to focus all our efforts on these areas to ensure your company operates within IRAS and Singapore Customs regulations in a timely and smooth manner.
Contact us today to get an affordable quotation for our services based on your specific needs.
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