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The Association of Small and Medium-sized Enterprises, or ASME, expects a spike in the number of SMEs registering for the Goods and Services Tax scheme in the next four months.

If they become GST-registered traders when the tax is raised from 5 percent to 7 percent on July 1st, they will be able to claim back any GST they pay.

Big businesses with an annual turnover of over S$1 million have to be GST-registered but smaller SMEs can choose whether or not they want to join the scheme.

GST-registered traders can claim GST paid on business expenses and purchases.

Those who are not GST-registered absorb any GST they pay, and do not put GST on their price tags.

Accounting firm KPMG says one third of businesses in Singapore are GST registered - totalling some 64,000 businesses.

ASME says it has received more enquiries about GST registration although it can't provide actual numbers.

Lawrence Leow, President, ASME, said: "A lot of these companies were already gearing up for registration. They were all waiting for the Budget announcement. Now that it's out, a lot of these companies will make the final decision to submit for application. Four months before, I expect a slight rush. I understand IRAS is all geared up to cope with the expected increase in applications."

Industry watchers say the extra paperwork and accounting costs for GST traders could eat into the SME's margins but help is at hand.

Mr Leow said: "IRAS and Spring Singapore have now offer a free software package, as well as this 50 percent grant to help defray the GST registration related cost. So that will help to defray the costs. Companies should tap on this offer, it's only valid for 2 years, so they have to act fast."

And, according to observers, more could be done to encourage GST registration among smaller SMEs.

Mr Leow said: "When it comes to refunds, the current process is that you have submit your returns within 30 days of end of accounting period. After you submit that, you have to pay any payable taxes. When it comes to refund, IRAS has up to 90 days to process a refund. I must say that IRAS did not go that length to process that refund, but I hope IRAS can do that process in double-quick time, hopefully within 2 to 4 weeks. That will help to ease cash flow of companies."

Lam Kok Shang, Executive Director - Indirect Tax, KPMG, said: "If I voluntarily register for GST, I have to stay registered for GST for at least 2 years. There could potentially be a requirement by the Inland Authority of Singapore, for voluntary registrars to put up a bankers' guarantee. So perhaps the IRAS could relook at this requirement, whether they could waive the requirement, to furnish a bankers guarantee for GST registrations. By putting up a bankers' guarantee, it leads to increased business costs."

Accounting firms are also ramping up their GST information seminars, as more firms express interest in finding out the pros and cons of GST registration.

More information is also available from the Inland Revenue Authority of Singapore, or associations like ASME or the Singapore International Chamber of Commerce. - CNA/ch

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