For Singaporean businesses engaged in international trade, the Goods and Services Tax (GST) system offers a significant advantage known as zero-rating. While the standard GST rate in Singapore is currently 9%, certain supplies are taxed at 0%.
Understanding zero-rated supply is critical because it allows businesses to remain competitive in global markets. Unlike “exempt” supplies, zero-rated supplies are considered taxable, which means businesses can still claim back the GST they paid on their inputs. This distinction is the backbone of Singapore’s export-oriented economy.
This guide provides a clear breakdown of what qualifies as a zero-rated supply, how to treat these transactions in your GST filing, and the steps to claim Input Tax Credit (ITC) and refunds from the Inland Revenue Authority of Singapore (IRAS).
Key Takeaways
- What It Is: A taxable supply where GST is charged at 0%. It primarily applies to the export of goods and the provision of international services.
- ITC Eligibility: Businesses making zero-rated supplies can claim Input Tax Credit on the GST paid for business inputs (e.g., raw materials, overheads).
- Zero-Rated vs. Exempt: Zero-rated supplies allow for tax recovery; exempt supplies do not.
- Documentation is Key: To apply 0% GST, you must maintain strict “Proof of Export” or evidence that services are international.
- Refund Process: If your input tax exceeds your output tax (common for exporters), IRAS will issue a GST refund within a specified timeframe.
What is a Zero-Rated Supply?
A zero-rated supply is a sale of goods or services where the GST rate is legally set at 0%. Even though no tax is collected from the customer, the transaction is still recorded as a taxable supply in your GST F5 return.
In Singapore, there are two main categories of zero-rated supplies:
1. Export of Goods
All goods exported from Singapore are zero-rated. This includes selling products to a customer in another country or selling goods that are delivered from a place outside Singapore to another place outside Singapore.
2. International Services
Services provided to overseas clients may be zero-rated if they fall under the description of “international services” as defined by Section 21(3) of the GST Act. Common examples include:
- Services related to land or buildings located outside Singapore.
- Services related to goods situated outside Singapore at the time the service is performed.
- Advertising services targeted at a market outside Singapore.
Claiming Input Tax Credit (ITC)
One of the biggest benefits of zero-rating is the ability to claim Input Tax Credit (ITC).
When you produce goods for export, you likely pay 9% GST to your local suppliers for materials, rent, and utilities. Because your final sale is zero-rated (0% output tax), you don’t collect GST to “offset” the tax you paid.
How it works:
- You pay $90 in GST to local suppliers (Input Tax).
- You sell your product overseas for $1,000 at 0% GST (Output Tax = $0).
- In your quarterly GST filing, you report a Net GST Refundable of $90.
IRAS allows you to recover this $90, ensuring that the tax does not become a cost to your business, thereby keeping your export prices lower and more competitive.
How to Get a GST Refund from IRAS
When your input tax is higher than your output tax (a common scenario for exporters), you are in a “refund” position.
Steps to Receive Your Refund:
- Submit Form GST F5: File your return accurately via the IRAS myTax Portal.
- Verification: IRAS may conduct a desk audit or ask for “Proof of Export” (e.g., Bill of Lading, Airway Bill, or commercial invoices) before processing large refunds.
- Direct Credit: Once approved, IRAS will disburse the refund directly into your registered bank account via GIRO.
- Timeline: For businesses with a good compliance record, IRAS typically processes refunds within 30 days of receiving the return.
Documentation Requirements: Proof of Export
You cannot simply charge 0% GST because a customer claims to be overseas. To justify zero-rating, you must maintain a “Proof of Export” file for at least 5 years.
Required documents typically include:
- For Goods: Export permits, bills of lading, mate’s receipts, and insurance documents.
- For Services: Contracts with overseas clients, evidence that the service benefit is enjoyed outside Singapore, and proof of payment from a foreign bank account.
Did You Know?
If you fail to produce valid proof of export during an IRAS audit, the sale will be treated as a standard-rated supply.
This means you must pay the 9% GST out of your own pocket, along with potential penalties for incorrect filing.
Comparison: Zero-Rated vs. Exempt Supplies
It is a common mistake to confuse these two categories. Here is the vital difference:
| Feature | Zero-Rated Supply | Exempt Supply |
| GST Rate | 0% | No GST |
| Taxable Supply? | Yes | No |
| Claim Input Tax? | Yes | No |
| Examples | Exports, International Services | Residential Rent, Financial Services |
Ready to Scale Your Singapore Business?
Streamline your financial operations with a unified payment platform designed for the Lion City.
Accept PayNow, cards, and digital wallets effortlessly while keeping your finances reconciled and compliant.
Conclusion: Mastering Zero-Rating for Growth
Zero-rated supplies are a powerful tool for Singaporean businesses looking to expand globally. By correctly identifying zero-rated transactions and maintaining meticulous documentation, you can effectively eliminate the GST burden on your exports through Input Tax Credit and timely IRAS refunds. This not only improves your cash flow but also strengthens your position in the international marketplace.
Frequently Asked Questions (FAQs)
1. Can I zero-rate a sale to a tourist in my Singapore shop?
No. Sales made over the counter in Singapore are standard-rated (9%). Tourists may claim a refund of the GST paid through the Tourist Refund Scheme at the airport, but the merchant must still charge the GST initially.
2. What if I provide digital services to an overseas individual?
Under the Overseas Vendor Registration (OVR) and Reverse Charge regimes, digital services provided to overseas persons are generally zero-rated as international services, provided you can prove the recipient is outside Singapore.
3. Do I need to be GST-registered to claim a refund on zero-rated supplies?
Yes. You can only claim Input Tax Credit or receive GST refunds if your business is GST-registered with IRAS.
4. How long does IRAS take to pay a GST refund?
Most refunds are processed within 30 days. However, if IRAS selects your return for an audit or if your bank details are not updated on the myTax Portal, the process may take longer.
