Goods and Services Tax (GST)

Outline Seminar 11
What is GST and how it works
Scope of GST
Types of supply
Place of supply
Time of supply
Value of supply
Importation and import reliefs

Outline (continued)

GST registration
GST reporting
Input GST claim
Deemed supplies
GST Administration
GST and Income tax

What is GST?

An Indirect tax
A value-added tax
Levy on domestic consumption
Burden of tax is on final consumers

How GST works

Output GST:
Is charged on biz. outputs,
collected from customers, and
payable to IRAS
Input GST:
paid/payable to suppliers/Customs (on imports) on biz.
inputs
recoverable from IRAS if certain conditions are satisfied
If output GST > input GST = net payable to IRAS
If output GST < input GST = net recoverable from IRAS

How GST works

Example
Production/distribution chain
SP (bef. GST)
RM supplier
$100
Manufacturer
180
Retailer
200
Consumer

VA
$100
80
20
____
$200

How GST works

Some assumptions:
Raw Material supplier has no inputs (SP = VA)
Product is standard-rated supply
All businesses are GST-registered
Full forward shifting of the tax

How GST works

RM SUP

MFR

IRAS

RET

CONS

How GST works

$100+$7.00

RM SUP

MFR
$7.00

$7.00

IRAS

RET

CONS

How GST works

$100+$7.00

RM SUP

$180+$12.60

MFR

RET

$7.00

$7.00

$12.60

$12.60

IRAS

CONS

How GST works

$100+$7.00

RM SUP

$180+$12.60

MFR

RET

$7.00

$7.00

$200+$14.00

CONS

$12.60

$12.60

IRAS

$14.00

Scope of GST
SUPPLY
Taxable supply of
goods/services
Made in Singapore
By a taxable person
In the furtherance of the
taxable persons biz.

IMPORTATION
Of goods
Into Singapore
By any person

Collected by:
GST-registered biz.

Collected by:
Singapore Customs

Taxable person
A Taxable person is a person

Who is registered for GST; or

Required (compulsory) to be registered for
GST under the GST Act

Furtherance of Business
Furtherance of business
Ordinary course of business
Exclude private transactions
Include sale of capital assets

Types of supply
A supply is anything done for a consideration
Anything done for free is not a supply unless
deemed so by the GST Act
Deemed supplies to be covered later

Types of supply
Supply

Taxable

Standard-rated
(7%)

Exempt

Zero-rated
(0%)

Out of scope

Types of supply (continued)

Out-of-scope supply (OOS)
No supply e.g. salary, donation, distribution of
dividend etc
Supply is made outside Singapore
E.g. of OOS:
- Transfer of business as a going-concern (TOGC)
- Supply made by non-GST registered person
- Third country sale

Out of scope supply third country sale

UK warehouse

goods
Japanese customer

Singapore trader

sale contract

Types of supply (continued)

Exempt supply
Prescribed financial services
E.g. interest from banks in Spore, sale of
shares/bond to Spore buyer, provision of loan
Sale and lease of residential properties
Exclude commercial properties, rental of
furnishing
Supply of investment precious metals (wef 1 Oct
2012)

Types of supply (continued)

Taxable supply
Zero-rated (0%) supplies
Exports of goods
International services
Standard-rated (7%) supplies
All others taxable supplies, including supply
of capital assets

International services
S.21(3)(a)
International transportation of passengers and
goods
E.g. Air ticket, freight charges for exports
S.21(3)(e)
Services directly in connection with any land or any
improvement thereto situated outside Spore
E.g. Architect firm in Spore designs building
located in Dubai

International services
S.21(3)(j)
Services under a contract with a person who belongs
outside Spore and directly benefit a person who
belongs outside Spore, who is outside Spore at the
time the services are performed and not being
services which are supplied directly in connection
with land/goods in Spore other than goods for
export.
E.g. Marketing services rendered by a Spore company
to its overseas related company

Output GST and Input GST implications

Is 7% output tax
chargeable on the
supply?

Is input tax on inputs

used in making the
supply recoverable as
an input tax credit?

OOS

EX

T-SR

T-ZR

N*

N*

Y**

Y**

* Some exceptions apply

** Provided that other relevant conditions are met

Place of supply
Supply of goods is made in Singapore if the
goods are physically located in Singapore at
the time of their appropriation/removal for
the supply
Supply of services is made in Singapore if the
supplier belongs in Singapore

Country where supplier belongs

Supplier belongs in Singapore if:
He has a biz/fixed establishment in Spore and
no such establishment elsewhere;
His usual place of residence is in Singapore; or
He has a biz/fixed establishment both in Spore
and elsewhere and the establishment most
directly connected with the supply of the
service is in Singapore

Supply of goods in Sin: ZR

Japanese customer
sale contract
Singapore trader
(warehouse in Singapore)

goods

Supply of goods outside Sin : OOS

Malaysia warehouse
goods
Singapore customer
sale contract

Singapore trader

Supply of services o/s Sin: OOS

UK consultancy firm
advisory service
Singapore customer

Supply of services in Sin: SR

UK firm - head office
UK firm - Singapore branch
advisory
service
Singapore customer

Time of supply
Issue When do we account for output tax in the
GST returns?
Normal time of supply rules:
(wef 1 July 2011)
Earlier of the following date:
(a) Date of issue of invoice ; or
(b) Date of receipt of payment
Other rules apply in prescribed/exceptional situations

Example Time of supply

GST registered company adopts 31 December year end.
GST reporting periods: Quarter ended 31/3, 30/6, 30/9, 31/12
Date of removal of goods for sale
25/09/15
Date of issuance of invoice
05/10/15
Date payment is received
15/10/15
When is the time of supply? When do we account for the output
GST in the GST returns?
Time of supply = 5/10/15
Account for output GST in the GST returns for the quarter
ended 31/12/15

Deposit
Upfront refundable deposit - not considered a payment for
time of supply if payment is held as security pending the
adoption of the sale

Upfront payment to discharge an obligation considered

payment for time of supply
Security deposit imposed for safe return of goods not a
supply GST not chargeable

Value of supply
Monetary Consideration (107%)
= Value of Supply (100%) + Output GST (7%)
Example- Sale price of $100 is exclusive of GST
Output GST = 7% x $100 = $7
If GST is absorbed by the trader
Example - Sale price of $100 is inclusive of GST
Output GST = $100 x 7/107 = $6.54

Value of supply
If VOS is in foreign currency, the VOS has to be
converted to S$ at prevail exchange rate at time of
supply

VOS = Open market value if consideration is not

wholly in monetary term or if VOS is below market
value on sale to related party

Value of supply
1) GST on importation
= (CIF + Custom Duty) x 7%
(CIF carriage, insurance, freight)

2) Value of supply = Net of Discount

E.g. Sale price (excluding GST) = $1,000
20% discount is given VOS = $800
Output GST = 7% x $800 = $56

Value of supply
3) Value of supply for trade-in
E.g. Sale of TV by a GST-registered trader to a GSTregistered customer worth $1,000 (exclusive of GST).
The customer trade-in an old TV worth $200. What is
the GST implication from traders perspective?
Trade-in treated a separate transaction.
Sale of TV output GST = $1,000 x 7%
Purchase of old TV input GST = $200 x 7%

Importation and imports relief

7% GST payable to Customs at the point of
importation of goods into Singapore
Owner/consignee/importer liable to pay regardless
of whether GST-registered
Relief from GST payment at the point of importation
may apply e.g. Major exporter scheme (MES)

GST registration

Compulsory s9 and 1st Sch, para 1

Retrospective test
Prospective test

Voluntary 1st Sch, para 8 and 9

Compulsory registration
Retrospective test
applies on 31/3, 30/6, 30/9 and 31/12 only
total value of taxable supplies for the current
quarter and the last three quarters > $1m?
if yes, must register unless IRAS is satisfied that
total value of expected taxable supplies* for the
next 4 quarters $1m
for the purpose of ascertaining liability to
register ONLY, taxable supplies exclude sales of
capital assets

Timeline of retrospective test

Lets assume it is 30 Sep 2015 today
4 quarters*

30.9.2014

4 quarters

30.9.2015

30.9.2016

12 months*
* taxable supplies (excl. sales of CA) > $1m?

Compulsory registration (cont)

Prospective test
applies at any date
total value of taxable supplies* expected in the
next 12 months > $1m?
if yes, must register

Timeline of prospective test

Lets assume it is 18 November 2015 today
12 months*

18.11.2015

17.11.2016

* taxable supplies (excl. sales of CA) > $1m?

Compulsory registration (cont)

Aggregation of taxable supplies of all separate
businesses of a:
sole proprietor
partnership with the same composition of partners

If there is a liability to register, IRAS must be

notified within 30 days
Application for exemption from registration where
taxable supplies are wholly or substantially zerorated

Voluntary registration
Why volunteer for GST registration?
2 situations:

trader with annual taxable supplies $1m

trader with a biz. establishment in Singapore
making only certain OOS supplies

Consider the costs and benefits of

voluntary registration

GST reporting
Prescribed (GST) accounting periods
generally, every quarter, as follows:
QE 31/1, 30/4, 31/7, 31/10; OR
QE 28/2, 31/5, 31/8, 30/11; OR
QE 31/3, 30/6, 30/9, 31/12,
The GST quarter will co-inside with the
traders financial year
monthly and 6-monthly reporting periods apply
for certain traders

GST reporting (cont)

E-file GST return (GST F5) for every quarter within
one month of the end of that quarter
In the GST return,
account for output tax payable to IRAS; and
claim input tax recoverable from IRAS.
if o/p tax > i/p tax, difference is payable within
one month of the end of the quarter
if i/p tax > o/p tax, difference is refundable
within 3 months of filing the quarterly return

Input GST Claim

Conditions for input GST claim:
Trader is GST-registered
Input tax relates to a business input
Input is used in the making of taxable supplies
(or certain out-of-scope supplies), i.e. input tax is
attributable to the making of such supplies
Input tax attributable to the making of exempt
supplies is not recoverable

Input GST Claim (cont)

Input tax relates to the GST reporting period
concerned and is properly charged by the supplier
Documentary evidence in support of input tax
credit claim
Suppliers tax invoice
Customs GST payment permit
Input tax is not blocked by Reg. 26 and 27

Blocked Input GST

Input GST relating to the following is NOT recoverable
from IRAS:
Sporting/recreational club joining fee,
subscription fee, membership, transfer fee etc
Medical and accident insurance premiums (certain
exception public liability, work injury
compensation)
Medical expenses (certain exception work injury
compensation, pre-employment assessment)

Blocked Input GST (contd)

Employees family benefits
E.g. employees children school fees
Motor cars (S-plated cars) and/or expenses in
relation to motor cars and hired cars
(Input GST relating to lorries, vans, motor cycles
are recoverable from IRAS)

Deemed supplies
Business goods disposed of for free free gifts
E.g. free gift to business associates
Business goods diverted for free to non-business uses
E.g. business goods used by employees for private use
Generally, market value / cost is taken as the value of the
deemed supply

Deemed supplies
Deemed output tax is not required :
Gift costs not more than $200 for each occasion
Input GST on goods has not been claimed, where:
a) taxpayer foregoes the input GST claim - wef 1 Oct
2012; or
b) input GST is blocked; or
c) goods are purchased are not subject to GST e.g.
purchased from non- GST registered supplier,
goods is an exempt supply

Deemed supplies
Deemed output tax is not required :
Provision of free accommodation in hotel,
boarding house of similar establishment to
employees
Provision of free food and beverages to employees
Provision of free services
Industrial/commercial samples not ordinarily
available for sale to the public

Example - there is a deemed supply

Purchase

Supplier

TRADER

Cost: $1,000
I/P GST: $70

IRAS

Recipient

Example - there is a deemed supply

Purchase

Supplier

Biz. gift

TRADER

Cost: $1,000
I/P GST: $70

Recipient
Deemed Supply: $1,000
Deemed O/P GST: $70

IRAS

Example - there is no deemed supply

Purchase

Supplier*

TRADER

Cost: $1,000
I/P GST: $0

IRAS
* not GST-registered

Recipient

Example - there is no deemed supply

Purchase

Supplier*

Biz. gift

TRADER

Cost: $1,000
I/P GST: $0

Deemed Supply: $0
Deemed O/P GST: $0

IRAS
* not GST-registered

Recipient

GST administration

Issuance of tax invoice Reg. 10

Contents of tax invoice Reg. 11
Simplified tax invoice Reg. 13
Issuance of serially printed receipt s44
Maintenance of business/accounting records
and documentation s46

GST and Income Tax

Issue:
Since input tax is paid/payable by a
taxpayer, can the taxpayer obtain any
income tax benefit for it i.e. is the input
tax considered a tax deductible expense
from the income tax perspective?

GST and Income Tax

Can the input tax be claimed as an input tax credit
in the GST return?
If yes, NO income tax benefit i.e. input GST
not deductible
If no (e.g. taxpayer is not GST-registered or the
input tax credit is blocked)
- the input tax is treated as part of the underlying
expense and the income tax treatment follows
that of the underlying expense

Examples to be discussed:
Income tax benefit for input tax?
Taxpayer is GST-registered
Input tax on purchases of trading stock
Input tax on purchases of
plant/machinery
Input tax on annual golf club subscription fee

Input tax on S-plate car expenses

Input tax Income tax

credit?
benefit?

Yes

No

Yes

No

No

Yes

No

No

Examples to be discussed:
Income tax benefit for input tax?
Taxpayer is not GST-registered

Input tax Income tax

credit?
benefit?

Input tax on purchases of trading stock

No

Yes

Input tax on purchases of

plant/machinery

No

No

Input tax on annual golf club subscription fee

No

Yes

Input tax on S-plate car expenses

No

No