GST on Imported Services (Issue 1)
GST is an indirect tax imposed on local consumption. In other words, it a type of tax levied on services ultimately consumed within Singapore regardless of whether they are procured from local or overseas suppliers. Based on current GST rules, services, other than the tax-exempted, provided by a domestic supplier subject to GST. Yet, the same services supplied by oversea supplier was not.
To level the GST treatment for all services consumed in Singapore, the Minister for Finance announced in Budget 2018 that the following regimes will be implemented from 1 Jan 2020 to tax imported services:
(1) Reverse charge regime for Business-to-Business (“B2B”) supplies* of imported services; and
(2) Overseas vendor registration regime for Business-to-Consumer (“B2C”) supplies* of imported digital services.
* Business-to-business (“B2B”) supplies refer to supplies made to GST-registered persons, including companies, partnerships and sole-proprietors. On the other hand, Business-to-Consumer (“B2C”) supplies refer to supplies made to non-GST registered persons, which include individuals and businesses that are not registered for GST.
Taxing B2B imported services by way of Reverse Charge (RC)
If you are a GST-registered business
From 1 Jan 2020, if you are either:
(1) a GST-registered partially exempt business that is not entitled to full input tax credit; or
(2) a GST-registered charity or voluntary welfare organization that receives non-business receipts,
you will be required to account for GST on all services that you procure from overseas suppliers (“imported services”) as if you are the supplier, except for certain services which are specifically excluded from the scope of reverse charge.
You will be entitled to claim the corresponding GST as your input tax, subject to the normal input tax recovery rules.
If you are a non-GST registered business
From 1 Jan 2020, if the total value of your imported services for a 12-month period exceeds S$1 million and you would not be entitled to full input tax credit even if you were GST-registered, you may become liable for GST-registration under the new GST registration rules.
Once registered for GST, you will be required to account for GST on both your taxable supplies and your imported services which are subject to reverse charge.
For more information, please refer to the e-Tax Guide GST: Taxing imported services by way of reverse charge