What Every Singapore Restaurant Owner Should Know About GST

Understanding Goods and Services Tax (GST) is crucial for restaurant owners in Singapore, as it directly impacts pricing, compliance, and overall financial management. This blog post outlines the essential information that every restaurant owner should know about GST to ensure they remain compliant and optimise their financial operations.

1. GST Registration Requirements

GST registration is a fundamental responsibility for many restaurant owners in Singapore. Here’s what you need to know:

• Threshold for Registration:
  • Restaurants must register for GST if their annual taxable turnover exceeds S$1 million.
  • This threshold includes revenue from food and beverage sales, as well as any other services provided (e.g., catering, events).
• Voluntary Registration:
  • Even if your restaurant has not yet reached the S$1 million mark, it can opt for voluntary GST registration.
  • This early registration allows you to reclaim input GST on purchases made for business purposes, such as ingredients and equipment.

Example: If a restaurant expects its revenue to exceed S$1 million, it may choose to register for GST in advance to reclaim input GST on things like kitchen appliances and raw materials.

2. Current GST Rate

The current GST rate in Singapore is 7%. This rate applies to most goods and services, including those in the food and beverage (F&B) sector. However, restaurant owners should be aware of the planned increase:

• GST Rate Increase: The Singaporean government has announced that the GST rate will increase to 9% in the coming years.
• Impact on Pricing: Restaurant owners will need to adjust their pricing strategies to accommodate the change in GST rates.

Example: If a restaurant charges S$25 for a meal and the GST is 7%, the total bill would be S$26.75. With the new 9% GST rate, the total would rise to S$27.25.

3. Charging GST

Once registered, restaurant owners are required to charge GST on all taxable sales. Here’s what that entails:

• Displaying Prices with GST: Generally, the prices displayed to customers should reflect the inclusion of GST, meaning customers should not be surprised by additional charges at checkout.
• Exceptions for Takeaway Items: In some cases, restaurants may display prices exclusive of GST for takeaway items, but they must clearly communicate this.
• Service Charges:
  • Service charges (typically 10%) are not subject to GST.
  • These charges should be clearly listed as separate from the GST-inclusive pricing.

Example: A restaurant lists a dish for S$30. The total bill will show the price of the dish (S$30) plus 7% GST (S$2.10), making the total S$32.10. A separate service charge of 10% (S$3) will be added on top, resulting in a total of S$35.10.

4. Filing GST Returns

Filing GST returns is an important part of complying with Singapore’s tax system. Here’s what you need to know:

• Frequency of Filing:
  • Restaurants are required to file GST returns on a quarterly basis.
• Filing Deadlines:
  • The GST return must be filed within one month after the end of the accounting period.
  • Late filing can lead to penalties, so it’s important to be diligent about deadlines.

Example: If a restaurant’s accounting period ends on 31st March, the GST return must be submitted by 30th April.

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5. Input Tax Claims

One of the key benefits of GST registration is the ability to claim input tax on purchases made for the business. These claims include:

• Ingredients: GST on purchases of food ingredients used to prepare meals.
• Equipment and Supplies: GST on purchases of equipment, kitchen supplies, and other business-related items.

Example: A restaurant buys a commercial fridge for S$8,000 and pays S$560 in GST. With GST registration, the restaurant can claim the S$560 back when filing its GST return, reducing the overall cost.

6. Service Charge Considerations

Many restaurants add a service charge (typically 10%) to their bills. Here’s how service charges and GST relate:

• Service Charges Are Not GSTable: Service charges are not subject to GST, but they must be clearly communicated to customers as separate from GST.
• Clear Communication: The service charge should be listed separately on the bill so that customers are aware of its distinct nature.

Example: If a restaurant charges S$50 for a meal, a 10% service charge (S$5) is added. The total will be S$55, but GST at 7% is only applied to the meal price (S$50), resulting in an additional S$3.50 in GST.

7. Compliance with Pricing Display Regulations

Restaurant owners must ensure that their pricing displays are in line with IRAS regulations to avoid confusion for customers:

• Prices Inclusive of GST: In most cases, restaurant prices should include GST to ensure transparency and avoid misleading customers.
• Displaying Prices Exclusive of GST: If prices are shown exclusive of GST, restaurants must clearly state that additional charges (GST or service charges) will apply.

Example: A café displays its menu prices as S$12, with a notice that GST and service charges are additional. If the customer orders, they will pay the S$12 plus GST (S$0.84) and a service charge (S$1.20), making the total bill S$14.04.

8. Documentation and Record-Keeping

Proper documentation and record-keeping are essential for GST compliance:

• Invoices and Receipts: Keep all invoices, receipts, and records of taxable transactions.
• Audit Trail: Accurate records are required for input tax claims and to ensure smooth filing during any tax audits.

Example: A restaurant receives an invoice for S$300 for fresh produce, which includes S$21 in GST. This invoice must be kept for filing GST returns and to claim the input GST.

9. Engaging Professional Help

Due to the complexities of GST regulations, many restaurant owners find it beneficial to consult accounting professionals. These experts can help with:

• GST Registration: Ensuring timely and correct registration.
• GST Filing: Assisting with quarterly filings and meeting deadlines.
• Optimising Tax Strategies: Helping businesses minimise their GST liabilities while remaining compliant.

Summary

Understanding GST is essential for every restaurant owner in Singapore. By following registration requirements, ensuring proper pricing displays, and maintaining accurate records, restaurant owners can ensure compliance and avoid penalties. As the GST rate is set to rise in the coming years, it’s important to stay informed and prepare for these changes. Consulting professionals can also help streamline processes and optimise tax management, allowing owners to focus on running their businesses efficiently.

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Guide to registering your company in Singapore 

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