Pros & Cons of Voluntarily Registering for GST
Most of us already know that the Goods & Services Tax (GST) rates in Singapore are set to be adjusted from 7% to 8% and 9% subsequently.
Some businesses may be contemplating whether it makes sense to voluntarily GST register the company so that they would not be affected by hike in GST rates.
Let’s dive into what may be the pros as well as cons of being voluntarily GST registered.
GST is Claimable if Company is Voluntarily GST Registered
The main benefit of being voluntarily GST registered will be that GST paid will be claimable.
For example if an office space is rented subject to GST or if an office space is sold subject to GST to a GST registered company, then in this case the GST will be claimable as the company renting or purchasing is GST registered.
Besides properties, GST paid to suppliers or partners for goods & services are also claimable.
Cost of GST Has to be Passed on to Consumers
With benefits, it also comes at a cost for businesses who decide to voluntarily GST register their company.
This is true as all GST registered companies in Singapore have to charge GST to their customers.
If the company has all along not been GST registered but now decides to voluntarily GST register, it may mean that the prices quoted to customers would have to be 7%, 8% or 9% more depending on which year the transaction takes places.
Also, it may not make sense for the company to absorb the GST for the customer as this will likely eat into the company’s profit margins and this may not be sustainable.
Apart from charging GST to customers, there may also be more administrative work to be done as a GST registered company compared to a non-GST registered company. This is because proper documentations and accounting have to be in order so that the claims submitted will be valid.
How to Decide if Worthwhile to be GST Registered
With both pros as well as cons, companies may be in a dilemma as to whether it is worthwhile to be GST registered in times of increasing GST rates.
As to whether it makes senses to be GST registered, here are some considerations which may help your company to make an informed decision.
You may consider if other companies in the same or similar industry are already GST registered. If most of them are already GST registered, chances are that there will be little impact as it is an industry norm to be GST registered.
Another consideration could be to check if prices of goods & services remain competitive as compared to others even with GST charged to customers. If prices remain competitive even with GST charged to the customers, it would likely make a lot of sense to be GST registered so that your company’s profit margin can be protected even in times of rising GST rates.
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