Before you dismiss this as a GST news that has nothing to do with you as a SME owner or as a consumer, you may want to read this.
With effect from 1 Jan 2020, GST registration and reporting will be required for customers or suppliers involve in B2C digital services. This places a new GST compliance burden on both local and overseas suppliers, local and overseas market place operators as well as consumers that procure from digital services.
Under the pre-2020 GST regime, local suppliers would only need to register from GST if its taxable supplies exceed S$1m in the last calendar year (retrospective basis) or for the next 12 months (prospective basis). As such, supplies (or for simplicity, sales) of digital services made outside of Singapore is treated as out-of-scope in the assessment of GST registration liability.
In line with levelling the playing field for local and overseas suppliers as well as bringing the leakage of non-domestic digital services into the GST system, supplier or market place operator is now required to register, charge and account for GST under OVR if it has a global turnover exceeding S$1 million and makes B2C supplies of digital services to customers in Singapore exceeding S$100,000. This means local (or oversea) supplier who is not required to register for GST as its local digital sales is below S$1m may now need to examine whether its global sale of digital services is above S$1m (under OVR). Overseas suppliers belonging outside Singapore supplying imported digital services locally would not otherwise be GST registered as imported services is treated out-of-scope may now be liable for GST registration. The GST registration liability of S$1m threshold is now expanded from the scope of “taxable supplies” (normal GST registration) to “global turnover” (OVR) as well as specifically bringing prescribed digital services in-scope.
A customer that procure digital services from overseas suppliers will now need to perform the following:
- If you are not GST registered and you import significant amount of services, you may be liable for GST registration under the new reverse charge rules effective 1 Jan 2020 (Assess GST registration liability under Reverse charge imported services). In addition, you need to be aware of the new input GST charge that OVR suppliers will levy on imported digital services.
- If you are GST registered and are not entitled to full input tax credit, you are now required to perform reverse charge on procured services from overseas suppliers in your GST reporting. In addition, you would also need to supply your GST registration number to OVR suppliers to ensure that you are not charge GST on imported digital services. Failure to do so may result in GST being wrongly charged on the purchase of digital services by OVR vendors, and you would not be able to claim the GST as your input tax. Instead, you would need to contact the Overseas Vendor to seek a refund which is an unnecessary and avoidable administrative workload.
The OVR rule is not just impacting suppliers in digital services but also unsuspecting customers of such digital services whom may not be aware of the additional compliance responsibility in their BAU as well as GST registration liability.