Conditions for Changing $1 Million Threshold for Businesses' Liability for GST Registration
Ministry of FinanceSpeakers
Summary
This question concerns whether the Government intends to change the $1 million GST registration threshold and the conditions for such a change, as raised by Mr Pritam Singh. Deputy Prime Minister Lawrence Wong explained that the threshold was set in 1994 to protect small businesses and hawkers from compliance costs that would otherwise increase consumer prices. He noted that the current limit maintains a light compliance burden, and approximately 70% of new registrations are now made voluntarily by businesses below the threshold. Deputy Prime Minister Lawrence Wong emphasized that the existing policy provides flexibility for enterprises while supporting a tax system with minimal exemptions. He stated that the Government will continue to assess the appropriateness of the $1 million threshold as part of its regular policy reviews.
Transcript
6 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.
Mr Lawrence Wong: 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.