Zero-rated GST offers a powerful financial advantage for businesses involved in exports and international services. By allowing companies to apply a 0% GST rate while still reclaiming input tax, it supports healthy cash flow, cost efficiency, and international growth, provided businesses stay compliant with return filings and regulations. This comprehensive guide brings together everything you need to know about zero-rated GST.
Key Takeaways
- Zero-rated GST is applied at 0% to eligible goods and services, allowing businesses to claim input tax on related expenses and maintain a competitive edge in international trade.
- A clear distinction between zero-rated and exempt supplies is essential to maximise input tax recovery and ensure correct GST treatment.
- Proper documentation and timely submission of GST returns are critical to avoid claim rejections and penalties by IRAS.
- Professional tax advice can help businesses in Singapore maintain compliance, secure refunds efficiently, and optimise tax planning across cross-border transactions.
What is Zero-Rated GST?
Zero-rated GST refers to a mechanism where the GST rate applied to specific goods or services is set at 0%. While these supplies are technically taxable, they attract no output tax. The primary advantage of this structure lies in its ability to allow businesses to recover the input tax incurred on expenses related to making those supplies.
The purpose of zero-rating is to support international trade and encourage businesses to engage in cross-border transactions without facing unnecessary tax burdens. In Singapore, which has positioned itself as a global trading and financial hub, zero-rated GST provisions are especially valuable to exporters and service providers with overseas clients.
For example, a Singapore-based company that exports electronics can apply 0% GST on the export sale but still recover GST paid on inputs such as components, packaging, warehousing, and freight services. This mechanism not only protects the business from absorbing unrecoverable GST costs but also supports healthy cash flow and competitive pricing in foreign markets.
As outlined under Section 21 of Singapore’s Goods and Services Tax Act, zero-rating also extends to certain international services, provided they meet specific criteria. The scheme plays a crucial role in enabling tax neutrality, which is a core principle of the GST system.
Types of Zero-Rated Supplies
Zero-rated supplies in Singapore are broadly classified into two categories: exported goods and international services. Each category has its own conditions and documentation requirements that must be met for the supply to qualify for zero-rating.
Exported Goods
When goods are sold to a customer outside Singapore, they may qualify for zero-rated GST—provided the goods are exported within 60 days from the date of invoice or receipt of payment (whichever comes earlier). The seller must also maintain adequate proof of export, such as shipping documents, customs permits, airway bills, and commercial invoices.
It’s important to understand that zero-rating is contingent not just on the sale being to an overseas customer, but also on the actual movement of goods out of Singapore within the stipulated timeframe. If the buyer arranges their own shipping and the seller fails to secure export proof, the transaction may be reclassified as standard-rated, leading to a GST liability. With Singapore’s trade volume exceeding S$1.2 trillion in 2024, the ability to apply zero-rated GST correctly is vital for companies looking to grow their exports while managing compliance risks.
International Services
International services that qualify for zero-rating must either be supplied to a person who belongs outside Singapore or performed wholly outside the country. These services include, but are not limited to, air and sea freight, cross-border consultancy, international advertising, and IT services provided to foreign clients.
For example, a Singapore firm running a marketing campaign targeted exclusively at European consumers for a foreign company would likely qualify as a zero-rated service. Similarly, co-location or server hosting services rendered in Singapore but benefiting an overseas client may also qualify, provided they meet IRAS guidelines.
IRAS has updated its guidance to reflect the growth of digital and remote services. In 2025, businesses providing web-hosting, software maintenance service, cloud computing, and remote professional consulting, or virtual professional services, should carefully assess the location of the recipient and the use of the service to determine the eligibility for zero-rating.
Zero-Rated vs Exempt Supplies
Understanding the difference between zero-rated and exempt supplies is crucial for accurate GST treatment. Both categories are not subject to output GST, but the financial implications differ significantly.
Zero-rated supplies, though taxed at 0%, allow the business to claim input GST on related expenses. This means that if a company sells zero-rated goods or services, it can recover GST incurred on purchases like materials, utilities, or professional fees.
Exempt supplies, on the other hand, do not attract GST but also do not permit any input tax recovery. Common exempt supplies in Singapore include most financial services, the sale or lease of residential property, and the issuance of digital payment tokens. Businesses dealing mostly in exempt supplies may not register for GST or, if registered, must proportionally adjust their input tax claims.
Failing to correctly differentiate between these two types can result in incorrect claims, disallowed refunds, and penalties. For GST-registered businesses, clarity between zero-rated and exempt classifications helps optimise tax efficiency and improve financial reporting accuracy.
Claiming Input Tax on Zero-Rated Supplies
Claiming input tax on zero-rated supplies is an essential part of GST compliance for businesses engaged in exports or international services. It allows businesses to recover the GST paid on expenses related to making such supplies, helping reduce operational costs and maintain healthy cash flow. However, this process requires proper documentation and a clear understanding of eligibility rules to avoid common filing errors and ensure that tax benefits are maximised.
Required Documentation
To support input tax claims, businesses must maintain accurate and complete records. This includes valid tax invoices, contracts, proof of payment, and, where applicable, shipping documents or export permits that confirm the movement of goods out of Singapore. For services, documentation such as signed agreements or email confirmations may be required to demonstrate that the services were provided to an overseas client.
IRAS reviews input tax claims closely and checks whether the expenses are directly tied to zero-rated supplies. If documentation is incomplete or mismatched, claims can be disallowed during audits. Proper record-keeping ensures that claims are processed smoothly and businesses remain compliant with GST regulations.
Common Mistakes to Avoid
One of the most common mistakes businesses make is assuming that all international transactions automatically qualify as zero-rated. In reality, each transaction must meet specific conditions set by IRAS. For goods, failure to export them within the required 60-day window may result in GST being applied. For services, not verifying that the customer belongs outside Singapore or that the service is used outside Singapore can also lead to incorrect classification.
Other frequent errors include missing or incorrect invoices, claiming input tax for disallowed purchases, or failing to file within the required period. To avoid these issues, businesses should review IRAS guidelines regularly, ensure all documentation is in order, and seek clarification where necessary.
GST Refunds for Zero-Rated Supplies
Businesses that deal largely in zero-rated supplies often find themselves in a position where the input tax they incur exceeds the output tax collected. In such cases, claiming a GST refund becomes a key way to recover the excess GST paid on business expenses.
Steps to Apply for a Refund
- Ensure input tax exceeds output tax: Begin by reviewing your GST transactions for the accounting period. A refund can only be claimed if the total GST incurred on purchases and expenses (input tax) is greater than the GST collected from customers (output tax).
- Prepare and review supporting documents: Before filing, ensure all relevant documentation is in place. This includes valid tax invoices, export permits, contracts, and payment evidence that link your input costs directly to zero-rated supplies. Having accurate records will support your refund claim and prevent delays during IRAS verification.
- File the GST F5 return through the IRAS myTax Portal: Log in to the myTax Portal and complete your GST F5 return for the relevant accounting period. Enter accurate figures for both input and output tax, and declare the refund amount under the appropriate field. Make sure there are no discrepancies between the return and your records.
- Submit the return by the statutory deadline: File the return within one month after the end of your GST accounting period. Late submissions may result in penalties or delayed refunds.
- Await IRAS processing and respond to any queries promptly: After submission, IRAS may request additional documentation to support your claim. Respond to such requests quickly and provide complete information to avoid delays in the processing of your refund.
- Receive refund directly to your bank account: Once your refund is approved, IRAS will credit the amount directly to your registered corporate bank account. Keep a record of the transaction for your GST filing history.
What IRAS Checks
Before approving any GST refund, IRAS conducts thorough checks to verify the legitimacy of the claim. This includes reviewing the business’s GST filings, comparing reported figures with supporting documentation, and confirming that input tax has been claimed only for allowable business expenses related to taxable supplies.
IRAS may also check whether goods have been exported within the required timeframe or whether services were correctly zero-rated. Ensuring consistency and accuracy in documentation helps avoid delays and supports a smooth refund process.
Compliance Tips for Zero-Rated GST
Compliance with zero-rated GST rules involves more than just filing returns. Businesses must actively maintain their records, stay updated with IRAS guidelines, and review internal processes to ensure long-term accuracy and compliance.
Accurate Record-Keeping
Maintaining clear and organised records is essential. All relevant documents, including invoices, contracts, payment confirmations, and export evidence, must be retained for at least five years. These records support input tax claims and provide the necessary audit trail if IRAS requests verification.
Regular checks on documentation practices can prevent issues before they arise and help businesses stay prepared for any compliance review.
Timely Filing
Filing GST returns on time is just as important as accurate reporting. Delays in submission can lead to penalties and may impact the timely processing of GST refunds. Businesses should set up internal reminders or automate filing workflows to avoid missing deadlines.
Filing within the prescribed time frame ensures that refund claims are considered without delay and that the business remains in good standing with IRAS
Regular Review of IRAS Guidelines
IRAS periodically updates its GST guidelines, including those related to zero-rated supplies. Businesses should review these changes regularly to ensure their processes remain aligned with the latest requirements.
A trusted partner like InCorp can help ensure the supplies are correctly classified, the documentation is audit-ready, and the claims are fully compliant with IRAS standards. Keeping up with new regulations and adopting any necessary changes promptly enables businesses to avoid penalties, non-compliance, and maintain smooth GST in an increasingly regulated environment. Remember, expert advice offers not just peace of mind, but measurable financial value as well.
FAQs about Zero-Rated GST in Singapore
What types of supplies qualify for zero-rated GST?
- Exported goods and qualifying international services—such as global logistics, overseas advertising, or consultancy for foreign clients—may be zero-rated, provided they meet the criteria set out in Section 21 of the GST Act.
How can I claim input tax on zero-rated supplies?
- You can claim input tax by keeping valid tax invoices and export documentation. The input tax must be related to taxable (zero-rated) activities and claimed in the correct filing period using the GST F5 return.
What are the steps for a GST refund application?
- To claim a refund, file the GST F5 return via IRAS myTax Portal. Ensure that your input tax exceeds output tax and all relevant documentation is available. Once approved, the refund will be credited to your registered bank account.
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