To register for GST or not

If a small business can afford, then it is actually better off not to register for GST, and here’s why:

Assume a tablet is worth $500, and once it is passed through our Customs, there is a GST of $35.

Type of company Implication to company
GST registered company It has to pay $535, but can claim back later. Hence, cost is still $500.
Non-GST registered company It also has to pay $535, but cannot claim back. Hence, cost is $535.

Until this point, it may seem that the non-GST registered company is at disadvantage, because its cost is higher. Let’s go deeper. Assume both companies want to earn $100 (absolute profit amount).

Type of company Sales message Implication to end-customer
GST registered company It tells its prospective customers that they are selling the tablet for $600 ($500 cost + $100 profit), EXCLUSIVE of GST. He needs to pay $642 ($600 x 7%).
Non-GST registered company It tells its prospective customers that they are selling the same tablet for $635 ($535 cost + $100 profit), all tax included, so-called “everything in”, or final price. He needs to pay only $635.

Naturally, the end-customer will be more compelled to buy from the non-GST registered company. In fact, for normal situations like above, it is better not to register for GST, for competitiveness reasons.

I know many companies would love to claim back their GST (also known as input tax) from various expenses such as office rental, IT equipment, office supplies, etc. I am not ruling out GST registration totally, as it is sometimes essential and required.

My point is that not every situation require you to claim back your input tax in order to remain profitable and competitive. I often cringe when I hear accountants advise their clients to “trust me, just register”, without working out the sums for their clients’ companies. That’s extremely dangerous because it really depends on situation.


Are you affected by GST problem? If yes, then contact Shaun Lee today!