How GST Works

GST Rate

The standard GST rate in Singapore is 9%. This rate is applicable to most goods and services supplied in Singapore and on goods imported into Singapore.

Basic Mechanism of GST

Multi-Stage Tax: GST is charged at every step of the supply chain, from production to the point of sale to the final consumer. Each business in the chain charges GST on its sales (output tax) and is charged GST on its purchases (input tax).

Claiming Input Tax Credits: Businesses can claim credits for the GST paid on their business purchases. This mechanism is crucial in preventing the stacking up of taxes.

Net GST Payable: The GST that businesses owe to the government is the difference between the GST they collect from their customers (output tax) and the GST they have paid on their purchases (input tax).

Avoidance of Tax Stacking

Credit Mechanism: The credit mechanism ensures that GST is effectively paid only on the value added at each stage of the supply chain. For instance, if a manufacturer buys raw materials and pays GST on them, this tax can be credited against the GST the manufacturer charges to wholesalers. The same process applies at each stage, right up to the final consumer.

Final Consumer Bears the Tax: Ultimately, it is the final consumer who bears the GST cost, as they cannot claim input tax credits. This makes GST a consumption tax.

Transparency in Taxation: Since each business in the supply chain knows the GST paid and collected, there's a transparency in how much tax is being paid at each stage, which helps in reducing the cascading effect.