Conditions for Changing $1 Million Threshold for Businesses' Liability for GST Registration08 May 2023
Parliamentary Question by Mr Pritam Singh:
To ask 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.
Parliamentary Reply by Deputy Prime Minister, and Minister for Finance Mr Lawrence Wong:
The current 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 HDB 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.