Debated in Parliament on 8 May 2023.
Mr Pritam Singh asked the Deputy Prime Minister and Minister for Finance (a) whether the Government intends to change the limit of $1 million before businesses are liable for GST registration; and (b) what conditions will determine a change in this policy.
The current Goods and Services Tax (GST) registration threshold of $1 million was put in place when the GST system was introduced in 1994. In designing the GST system, we decided to go with a single rate tax with as few exemptions as possible for specific goods or services. But we decided to set the registration threshold at $1 million, thereby exempting many small and medium enterprises (SMEs), especially the hawkers and retail shops in our Housing and Development Board neighbourhoods. It would have been difficult for such entities to collect the GST as they would have to incur additional costs to comply with the GST accounting and collection requirements. Such costs would then likely be passed on to consumers who buy many of their daily necessities from these neighbourhood shops.
However, businesses below the threshold can register for GST voluntarily. In fact, around 70% of businesses that newly register for GST today do so voluntarily, even though their turnover falls below the threshold.
The $1 million threshold has kept the compliance burden of our GST system light, while providing flexibility for businesses to voluntarily register. We will continue to assess the appropriateness of this threshold as part of our regular policy reviews.
PAPERCUTS