SG companies to adjust finances amidst 1% GST increase

Singapore's Minister of Finance announced that the GST rate will be increased from 7% to 8% from January 1, 2023 and then from 8% to 9% from January 1, 2024.

Singaporean businesses are gearing up for a significant financial shift with the upcoming 1% Goods and Services Tax (GST) increase taking effect from January 1, 2024.

Keith Tnee, Senior Partner at Tan Kok Quan Partnership, said that the GST increase has been long anticipated as he advised companies to consider the financial impact of this additional 1% on their goods and services.

“This can only mean that there will be a broad-based impact across various companies in Singapore. So, for GST-registered companies, this may require them to relook at some of the operations and revise some of your practices and to also consider when and whether to pass on the GST increases for your customers,” he said.

He emphasizes the need for companies, especially those in industries dealing with substantial fund inflows and outflows, to revise existing practices to ensure proper paper trails and systems are in place, adding that this revision is crucial for handling funds flow and increasing regulatory oversight.

In addition to GST changes, Tnee highlights the importance of monitoring corporate debtors, especially smaller market players as tracking the aging of debts and repayment rates serves as an early warning sign for the financial health of these debtors.

“I think it would be important for companies with corporate debtors to have a system to monitor how much credit is being extended, especially the smaller players in the market and also to track the aging of debts and also how quickly some of these debtors are actually repaying this debt,” he explained, “Because that could always serve as a very important warning, early warning sign as to the financial health of the debtors.”

Regarding the new bills taking effect in 2024, Tnee outlines three key areas with the first one being the amendments to the Corruption, Drug Trafficking, and Other Serious Crimes Act, which may lead to more stringent controls, especially in the banking and financial industries.

“The amendments in this new bill will seek to address instances where people may retain control have access to funds, which are the fruits of such criminal activities,” he said, “Given the high profile nature of the manual money laundering case in Singapore, this could potentially lead to small stringent and tighter controls in the yield curve.”

The second is the anticipated GST increase, requiring GST-registered companies to revise operations and consider the impact of passing on the increase to customers, while the third area concerns the extension of the simplified insolvency programme, which could impact companies with corporate debtors, particularly micro and small companies, in debt recovery due to restructuring or liquidation programs.

“This could mean that the companies with such corporate debtors may face some difficulty in recovering some of the debts of these companies because of the debt restructuring or the liquidation programs. So, it may be worthwhile for companies with such competitors to keep a close eye on the amount of credit being extended to their corporate debtors,” Tnee said.

He notes that the banking and financial sectors might face increased scrutiny due to amendments related to money laundering. For companies with corporate debtors, the extension of the simplified insolvency program might necessitate closer monitoring of debtor finances and potential challenges in debt recovery.