11 GST Slides LYL

8/18/2019 11 GST Slides LYL

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Goods and Services Tax (GST)


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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


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Outline (continued)

• GST registration

• GST reporting

• Input GST claim• Deemed supplies

• GST Administration

• GST and Income tax


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What is GST?

• An Indirect tax

• A value-added tax

• Levy on domestic consumption

• Burden of tax is on final consumers


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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


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How GST works

Example

Production/distribution chain

SP (bef. GST) VA

RM supplier $100 $100

Manufacturer 180 80

Retailer 200 20

Consumer ____

$200


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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


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How GST works

RM SUP MFR RET CONS

IRAS


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How GST works

$100+$7.00

RM SUP MFR RET CONS

$7.00

$7.00

IRAS


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How GST works

$100+$7.00 $180+$12.60

RM SUP MFR RET CONS

$7.00 $12.60

$7.00 $12.60

IRAS


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How GST works

$100+$7.00 $180+$12.60 $200+$14.00

RM SUP MFR RET CONS

$7.00 $12.60

$7.00 $12.60 $14.00

IRAS


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Scope of GST

SUPPLY

• Taxable supply ofgoods/services

• Made in Singapore

• By a taxable person

• In the furtherance of thetaxable person’s biz.

Collected by:

GST-registered biz.

IMPORTATION

• Of goods

• Into Singapore

• By any person

Collected by:

Singapore Customs


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Taxable person

A Taxable person is a person

•

Who is registered for GST; or

• Required (compulsory) to be registered forGST under the GST Act


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Furtherance of Business

Furtherance of business≠ Ordinary course of business

•

Exclude private transactions

• Include sale of capital assets


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Types of supply

• A supply is anything done for a consideration

•

Anything done for free is not a supply unlessdeemed so by the GST Act

Deemed supplies – to be covered later


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Types of supply

Supply

Taxable Exempt Out of scope

Standard-rated Zero-rated(7%) (0%)


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Types of supply (continued)

• Out-of-scope supply (OOS) – No supply – e.g. salary, donation, distribution of

dividend etc

–

Supply is made outside SingaporeE.g. of OOS:

- Transfer of business as a going-concern (TOGC)

- Supply made by non-GST registered person

- Third country sale


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Out of scope supply – third country sale

UK warehouse goods

Japanese customer

Singapore trader sale contract


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• 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)


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• Taxable supply – Zero-rated (0%) supplies

• Exports of goods

•

International services

– Standard-rated (7%) supplies

• All others taxable supplies, including supply

of capital assets


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International services •

S.21(3)(a)International transportation of passengers andgoods

E.g. Air ticket, freight charges for exports

• S.21(3)(e)

Services directly in connection with any land or anyimprovement thereto situated outside Spore

E.g. Architect firm in Spore designs buildinglocated in Dubai


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International services •

S.21(3)(j)Services under a contract with a person who belongs

outside Spore and directly benefit a person whobelongs outside Spore, who is outside Spore at the

time the services are performed and not beingservices which are supplied directly in connectionwith land/goods in Spore other than goods forexport.

E.g. Marketing services rendered by a Spore companyto its overseas related company


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Output GST and Input GST implications

OOS EX T-SR T-ZR

Is 7% output tax

chargeable on the

supply?

N N Y N

Is input tax on inputs

used in making the

supply recoverable as

an input tax credit?

N* N* Y** Y**

* Some exceptions apply

** Provided that other relevant conditions are met


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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


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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 Sporeand elsewhere and the establishment mostdirectly connected with the supply of theservice is in Singapore


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Supply of goods in Sin: ZR

Japanese customer

sale contract goods

Singapore trader

(warehouse in Singapore)


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Supply of goods outside Sin : OOS

Malaysia warehouse

goods

Singapore customer

sale contract

Singapore trader


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Supply of services o/s Sin: OOS

UK consultancy firm

advisory service

Singapore customer


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Supply of services in Sin: SR

UK firm - head office

UK firm - Singapore branch

advisory

service

Singapore customer


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Time of supply•

Issue – When do we account for output tax in theGST 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


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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 outputGST in the GST returns?

Time of supply = 5/10/15

Account for output GST in the GST returns for the quarterended 31/12/15


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Deposit

•

Upfront refundable deposit - not considered a payment fortime of supply if payment is held as security pending the

adoption of the sale

•

Upfront payment to discharge an obligation – consideredpayment for time of supply

• Security deposit imposed for safe return of goods – not a

supply – GST not chargeable


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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 GSTOutput GST = $100 x 7/107 = $6.54


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Value of supply

If VOS is in foreign currency, the VOS has to beconverted 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


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Value of supply

1) GST on importation= (CIF + Custom Duty) x 7%

(CIF – carriage, insurance, freight)

2) Value of supply = Net of DiscountE.g. Sale price (excluding GST) = $1,000

20% discount is given – VOS = $800

Output GST = 7% x $800 = $56


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Value of supply3) Value of supply for trade-in

E.g. Sale of TV by a GST-registered trader to a GST-registered customer worth $1,000 (exclusive of GST).The customer trade-in an old TV worth $200. What isthe GST implication from trader’s 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%


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Importation and imports relief

• 7% GST payable to Customs at the point of

importation of goods into Singapore

• Owner/consignee/importer liable to pay regardlessof whether GST-registered

•

Relief from GST payment at the point of importationmay apply – e.g. Major exporter scheme (MES)


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GST registration

• Compulsory – s9 and 1st Sch, para 1

– Retrospective test

– Prospective test

• Voluntary – 1st Sch, para 8 and 9


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Compulsory registration

•Retrospective test – applies on 31/3, 30/6, 30/9 and 31/12 only

– total value of taxable supplies for the currentquarter and the last three quarters > $1m?

– if yes, must register unless IRAS is satisfied thattotal value of expected taxable supplies* for thenext 4 quarters $1m

– for the purpose of ascertaining liability toregister ONLY, taxable supplies exclude sales ofcapital assets


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Timeline of retrospective test

Let’s assume it is 30 Sep 2015 today

4 quarters* 4 quarters

30.9.2014 30.9.2015 30.9.2016

12 months*

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


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Compulsory registration (con’t)

• Prospective test

– applies at any date

– total value of taxable supplies* expected in the

next 12 months > $1m?

– if yes, must register


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Timeline of prospective test

Let’s assume it is 18 November 2015 today

12 months*

18.11.2015 17.11.2016

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


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Compulsory registration (con’t) •

Aggregation of taxable supplies of all separatebusinesses of a: – sole proprietor

– partnership with the same composition of partners

• If there is a liability to register, IRAS must benotified within 30 days

• Application for exemption from registration where

taxable supplies are wholly or substantially zero-rated


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Voluntary registration

• Why volunteer for GST registration?

• 2 situations: – trader with annual taxable supplies $1m

– trader with a biz. establishment in Singaporemaking only certain OOS supplies

•

Consider the costs and benefits ofvoluntary registration


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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 thetrader’s financial year

– monthly and 6-monthly reporting periods applyfor certain traders


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GST reporting (con’t)

•E-file GST return (GST F5) for every quarter withinone 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


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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 isattributable to the making of such supplies

– Input tax attributable to the making of exemptsupplies is not recoverable


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Input GST Claim (con’t)

•

Input tax relates to the GST reporting periodconcerned and is properly charged by the supplier

• Documentary evidence in support of input tax

credit claim – Supplier’s tax invoice

– Customs GST payment permit

• Input tax is not blocked by Reg. 26 and 27


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Blocked Input GST

Input GST relating to the following is NOT recoverablefrom 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 injurycompensation, pre-employment assessment)


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Blocked Input GST (cont’d)

• Employee’s “family benefits”

E.g. employee’s 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)


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Deemed supplies

•

Business goods disposed of for free – free giftsE.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 thedeemed supply


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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 Oct2012; 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


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Deemed suppliesDeemed output tax is not required :• Provision of free accommodation in hotel,

boarding house of similar establishment toemployees

•Provision of free food and beverages to employees

• Provision of free services

•

Industrial/commercial samples not ordinarilyavailable for sale to the public


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Example - there is a deemed supply

Purchase

Supplier TRADER Recipient

Cost: $1,000

I/P GST: $70

IRAS


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Example - there is a deemed supply

Purchase Biz. gift

Supplier TRADER Recipient

Cost: $1,000 Deemed Supply: $1,000

I/P GST: $70 Deemed O/P GST: $70

IRAS


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Example - there is no deemed supply

Purchase

Supplier* TRADER Recipient

Cost: $1,000

I/P GST: $0

IRAS* not GST-registered


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Example - there is no deemed supply

Purchase Biz. gift

Supplier* TRADER Recipient

Cost: $1,000 Deemed Supply: $0

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

IRAS* not GST-registered


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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


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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 inputtax considered a tax deductible expense

from the income tax perspective?


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GST and Income Tax

• Can the input tax be claimed as an input tax creditin 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 followsthat of the underlying expense

Examples to be discussed:


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Income tax benefit for input tax?

Taxpayer is GST-registeredInput taxcredit?

Income taxbenefit?

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

Yes No

Yes No

No Yes

No No



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Income tax benefit for input tax?

Taxpayer is not GST-registeredInput taxcredit?

Income taxbenefit?

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

No

No

No

No

Yes

No

Yes

No

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