Decoding Zero-Rated Supplies
Summary: Goods and services where you don’t need to pay GST.
Zero-rated supplies are goods or services with no Goods and Services Tax (GST). Furthermore, despite being zero-rated, these supplies still qualify for input tax credits. So, when businesses purchase these items, they can claim back their input tax, reducing the total GST they need to hand over.
What Actually Counts as Zero-Rated Supplies?
If you’re wondering what types of goods or services fall into this category, think about supplies used to create other products and form an essential part of the supply chain. To keep from piling on taxes and potentially stifling businesses, they’re given a zero rating.
In some countries, things that we can’t live without (like food, medicine, and water) are zero-rated to make sure they’re affordable.
To give their exports a competitive edge, many governments also apply zero-rate to goods and services destined for international customers.
When to Apply a 0% GST (Zero-Rate) in Singapore?
Offering International Services
If your service delivery aligns with the criteria outlined in Section 21(3) of the GST Act, you’re dealing with international services which are zero-rated (i.e., exempt from GST).
Depending on your service, you may need to verify your customer’s status (i.e., whether the customer is a local or overseas entity) before applying the 0% GST.
You can apply GST at 0% if, at the time of supply (depending on the ‘time of supply’ rules for exports), you’re certain that:
The goods you’re selling will be or already have been exported; and
You have all the necessary documentation to support your 0% GST application.
To ensure you have all the correct documentation for exports that qualify for zero-rating, you should check out the Guide on Exports (Seventh Edition). It outlines several export scenarios and the corresponding list of documents required.