As with other countries which have GST or VAT laws, Singapore GST-registered establishments have to charge GST on the value of the supply of goods and services made in Singapore. It is a rather potentially dangerous area that is often overlooked by most businesses. At the outset, it may seem to be a straightforward application of the GST rule but many businesses do not realize the larger GST implication if it gets wrong in valuing its supply.
In normal business transactions, the value of the supply will usually be the consideration or price paid by the customer less the GST amount chargeable. But what if the consideration is not consisting or not wholly consisting of money? Then the open market value of the supply will apply. This would also apply in the case where related parties transact with each other.
Besides the GST that is chargeable on the supply of goods and services in Singapore, GST is also chargeable on imports of most goods into Singapore, regardless of whether the importer is GST registered or not. In the case of imports, the value of the imports to be calculated for GST purposes is not only the consideration for the goods paid by the importer but also includes all duties payable as assessed by Singapore Customs. Furthermore, importers must also include other considerations paid such as commissions and incidental charges so as to compute the right GST amount to be paid to Customs.
Clearly, it is of utmost importance to understand the rules governing the value of supply, as it directly affects the amount of GST chargeable. Any overcharging or undercharging of GST because of incorrect values attached to the supply will lead to serious implications for the business, since the amount involved will be quite large if errors are not detected earlier. Therefore, it is crucial for businesses to ensure that the correct GST amount is charged on the correct value of supply.
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