Extended GST grace period for SMEs among initiatives to help firms in Singapore: MOF

SINGAPORE – The Ministry of Finance on Feb 28 announced new and enhanced measures aimed at fostering a more pro-business environment, as well as simplifying rules and processes for companies here.

From July 1, the Inland Revenue Authority of Singapore (Iras) will extend the grace period for businesses to begin charging goods and services tax (GST), from one month to two months after a business forecasts that it will cross $1 million in taxable turnover.

Currently, businesses expecting to cross the $1 million taxable turnover threshold within the next 12 months must register for and start charging GST within a month of forecast.

Second Minister for Finance Chee Hong Tat said in the debate on the Ministry of Finance’s budget in Parliament on Feb 28 that “this timeline can be tight for some small and medium-sized enterprises (SMEs)”.

The one-month extension will give SMEs more time to prepare, and 1,500 businesses are expected to benefit from it every year, said Mr Chee.

In addition, Iras will remove the approval requirement needed for second-hand goods dealers to use the GST Gross Margin Scheme (GMS). This will also take effect from July 1.

The existing GST GMS allows second-hand goods dealers to charge GST on the gross margin of sale – the difference between the item’s cost paid by the company and the amount it was sold for – rather than the full sale price, as GST is often already priced into the base cost from earlier transactions. Examples of such second-hand goods are motor vehicles, electrical appliances, furniture and jewellery.

Mr Chee said most dealers are generally compliant with the scheme’s requirements.

Removing the need to obtain approval will streamline the compliance process, particularly for new or smaller second-hand goods dealers, he added.

Innovative Procurement Partnership

Singapore will make it easier for businesses participating in government tenders that require innovative solutions, whether in the form of a new technology or product, to progress from pilot phase to deployment at scale through the Innovative Procurement Partnership initiative.

Senior Parliamentary Secretary for Finance Shawn Huang said at the debate on Feb 28 that this means that the business can be assured of the opportunity to scale up its innovative product or service should the pilot be successful.

Mr Huang said that many agencies now require firms to demonstrate their track record and financial capacity in order to be selected. This helps ensure reliability, especially for goods, services and infrastructure used by the public, he added.

He noted that while this consideration remains relevant, it can be challenging if the proposed solution is new to the market.

Further, the pilot phase and deployment phase are typically structured as separate tenders today, Mr Huang said.

This means there is no guarantee that a business that wins the tender for the pilot phase will get to deploy its solution at scale with the Government, even if the pilot was successful, he added.

More details on the Innovative Procurement Partnership initiative will be shared in the second half of 2025.

Enhancement of Tender Lite

The Government will also extend the Tender Lite initiative to the construction and information and communications technology (ICT) sectors.

The initiative was rolled out in April 2024 to simplify procurement of general goods and services, and covers tenders of up to $1 million for such goods.

Mr Huang noted that Tender Lite has been well received, with 90 per cent of businesses in a survey indicating that the simpler conditions of contract in Tender Lite made participation in government tenders easier.

He also noted that more than 700 Tender Lite opportunities have been published on GeBIZ – the primary platform to transact with the public sector for procurement of goods and services – as at Jan 1. Out of the 700, more than 400 have been awarded and about 85 per cent were awarded to SMEs.

Tender Lite for construction contracts will be launched in May, while Tender Lite for ICT contracts will be implemented in phases from the second half of 2025.

Construction firms are expected to benefit from reduced administrative processes and shared risks.

“We will share the risks with businesses. We will cap the liquidated damages at 10 per cent of contract value and remove the need for security deposits. We will also remove or shorten the defects liability period where possible. These changes will help to ease contractors’ cash flow,” said Mr Huang.

More details will be revealed after consultations with the ICT industry, he added.