GST Rate Change with effect from 01 January 2023
With the upcoming GST rate increase from 7% to 8% on the horizon, businesses need to take active steps to ensure that staff and operations are ready for the change to come in January 2023. In the article below, we highlight some of the matters that you should be aware of.
Time of Supply and GST
In general, the time of supply rule for GST is that a sale or supply is recognised when a payment is received, or when an invoice is issued for goods sold or service performed, whichever is earlier. It follows that from 1 January 2023, any payment received, or invoice issued should be charged at 8% GST.
Transitional Rules affecting rate change
In many cases, there may be time lapses between 1) issuance of the invoice, 2) delivery of goods and services, and 3) payment received from the customer. A transaction that takes place over a period in which the rate change occurs is subjected to transitional rules. Some of the common scenarios that might affect your business include those below:
Scenario 1: Full Payment received before 01 Jan 23
If full payment was received before the rate change on 1 Jan 2023, the supply is subjected to 7% GST. In such cases, the invoice issued after 1 Jan 2023 may reflect GST charged at 7%.
Scenario 2: Invoice issued before 01 Jan 2023
In the event that goods or services have neither been fulfilled, nor payment received for the invoice that was issued before 1 January 2023, the supply will be subjected to 8% GST. A credit note is required to cancel the tax invoice issued before 1 January 2023, and a new invoice at 8% GST is to be issued.
On the other hand, if the invoice issuance and goods are delivered before 1 January 2023, the 7% GST rate would apply to the transaction.
Scenario 3: Delivery of Goods/Services before 1 January 2023
If the delivery of goods and services has been performed before 1 January 2023, businesses may elect to charge 7% GST even if the invoice and payment have been received after the rate change.
Business and Operational needs
Aside from understanding the different rates that may apply during the transitional period, businesses also need to assess and plan ahead if the existing Point-of-Sales systems and accounting software can be updated to the new rates.
For GST-inclusive prices on display, these must be updated to reflect the revised rates on 1 Jan 2023. Businesses should therefore be prepared to print or update existing prices or promotional materials, such as price tags, price lists, or websites.
· GST is charged at 8% from 1 Jan 2023
· Be aware of transitional rules if a transaction straddles the date of the rate change
· Ensure that Point-of-sales and accounting systems are ready
· Ensure that displayed prices inclusive of GST are up to date
For more information and assistance on accounting and GST matters, do feel free to contact us here.