Getting your business ready for the second GST rate change
As announced by Minister for Finance in Budget 2022, the second step of the GST rate change will take place from 1 Jan 2024. The revenue from the increase in GST will go towards supporting our healthcare expenditure, and to take care of our seniors.
GST will be raised from 8% to 9% from 1 Jan 2024.
All GST-registered businesses are encouraged to start their preparations early for a smooth transition to the second GST rate change. Below are some points for you to take note.
1. How will my GST-registered business be affected?
For any standard-rated supply of goods and services that you make on or after 1 Jan 2024, you must charge GST at 9%. For instance, if you issue an invoice and receive payments for your supply on or after 1 Jan 2024, you must account for GST at 9%.
2. Avoiding rate change errors
Below are some errors to avoid when preparing for the second GST rate change:
Error #1 - Charging GST at 9% before 1 Jan 2024
Your payments received before 1 Jan 2024 should be subject to the current rate of 8%. This is so even if the goods and/or services are to be delivered on or after 1 Jan 2024. | Check that your systems (e.g. accounting and invoicing systems, retail management systems, cash register and receipting systems for point-of-sales (POS) billing) are configured for the 9% GST rate to take effect from 1 Jan 2024 and not earlier. |
Error #2 – Charging or displaying GST at 8% from 1 Jan 2024
You may have multiple sales channels (e.g. mobile apps, self-ordering kiosks, physical outlets and online websites) where you display prices and make sales of goods and services.
Review and ensure that the receipts/invoices issued for all sales channels are updated to charge 9% GST from 1 Jan 2024. Your price displays for all sale channels should also be updated to 9% GST from 1 Jan 2024. | If you intend to absorb the additional 1% GST, check that the receipts/invoices issued and price displays that mention the GST rate are updated to 9% GST from 1 Jan 2024. |
Error #3 – GST amount is computed correctly but wrong GST rate is reflected on receipts/invoices issued
Invoice Date: 1 Jan 2024 Amount before GST = $100 GST at 8% = $9 (GST amount is computed correctly but wrong GST rate is reflected) Total amount payable = $109 |
Check that the correct GST rate is reflected when you issue receipts/invoices.
Such checks should be performed when testing systems and processes before and after the implementation of 9% GST.
3. Communicating reasons for price/fee increases to consumers
During the first step of the GST rate change from 7% to 8%, it has been observed that some businesses had increased prices or service fees. This was to account for the additional 1% GST rate increase and higher raw material and overhead costs. However, some businesses attributed the increase primarily or solely to the increase in GST.
Ahead of the increase in the GST rate to 9%, the Government would like to remind businesses to be transparent in communicating the reasons for any price increases to consumers. Businesses should explain the main reasons for the increases in price/fee, and not misrepresent the situation to consumers by attributing the price increases primarily or solely to the increase in GST.
The Committee Against Profiteering (CAP) takes a serious view of any unjustified price increases using the GST increase as an excuse and will investigate all feedback on such cases.
For more information on how to explain a price increase to consumers, businesses can refer to IRAS’ webpage on the GST Rate Change for Businesses.
4. Checking if your business is ready for the rate change
You may use the checklist on IRAS’ website to help you prepare your business early for the rate change.
There are 3 main things you need to do:
- Prices inclusive of GST at 8% applicable before 1 Jan 2024.
- Prices inclusive of GST at 9% with effect from 1 Jan 2024.
How transitional rules are applied
Scenario 1: Invoice issued before 1 Jan 2024
- Invoice issued before 1 Jan 2024
- Full payment received on or after 1 Jan 2024
- Goods delivered on or after 1 Jan 2024
Application of transition rules:
Invoice issued before 1 Jan 2024 should reflect the prevailing GST rate of 8%. However as full payment is received and goods are delivered after the rate change, GST should be accounted at the new rate of 9%. You are required to issue a credit note to cancel the original invoice and issue a new invoice by 15 Jan 2024 to charge GST at 9%.
Scenario 2: Invoice issued on or after 1 Jan 2024
- Invoice issued on or after 1 Jan 2024
- Full payment received on or after 1 Jan 2024
- Services fully performed before 1 Jan 2024
Application of transition rules:
As full payment is received and invoice issued after the rate change, GST should be accounted at the new rate of 9%. However, since the services are fully performed before the rate change, you may choose to charge and account GST at 8%. You may issue a credit note for the GST amount that is overcharged or cancel the original tax invoice and issue a new invoice at 8% by 15 Jan 2024.
For a comprehensive understanding and application of the transitional rules, refer to our e-Tax Guide “ 2024 GST Rate Change: A Guide for GST-registered Businesses”.
5. GST Rate Change webinars
Read through our Resources for GST Rate Change and still have questions? IRAS will be organising live webinar sessions until Dec 2023. The webinars are only for businesses who still need assistance after reading through the materials. Please refer to IRAS’ webpage on Preparing for GST Rate Change for more details on the webinars.