GOODS AND SERVICES TAX (GST) “Introduction to GST”

1. GOODS AND SERVICES TAX (GST) “Introduction to GST”

2. E-LEARNING • “Introduction to GST” course can now be done online! • e-Learning mode is strongly encouraged over seminar • Benefits include: • On-demand availability: accessible anytime and anywhere at your convenience • Self-pacing: control over the pace of learning and modules can be reviewed as often as needed • Interactivity: higher knowledge retention through active learning and use of examples and interactive exercises etc. For more information, please visit: www.iras.gov.sg > GST > For GST-registered businesses > GST Course "Introduction to GST" (e-Learning/Seminar) 

3. COURSE OUTLINE GST and My Responsibilities Charging GST on Sales Accounting for GST on Other Transactions Claiming GST on Business Purchases and Imports Price Display, Invoicing and Record-keeping BREAK 6. e-Filing GST returns and Correcting Mistakes 7. Penalties and Recovery Actions 8. Tips on Compliance 9. Notifying of Changes to Business and Cancelling GST Registration 10. Where to Get Help Useful Information Q&A

4. 1. GST and My Responsibilities • What is GST? • How does GST Work? • What are the Responsibilities of a GST-registered Business? Relevant e-Tax Guides: “GST: General Guide For Businesses” “Do I Need to Register?”

5. 1. GST and My Responsibilities • What is GST? • Tax on domestic consumption of goods and services and importation of goods • Paid when: • - Goods or services are purchased from GST-registered businesses • - Goods are imported into Singapore (collected by Singapore Customs at point of importation) • Self-assessed tax

6. GST on supply of goods & services (Output tax) GST paid on business purchases (Input tax) less equals Net GST 1. GST and My Responsibilities How does GST Work? - + Payable to Comptroller Refundable from Comptroller

7. Import GST = $35 $500 + $35 (7% GST) Output tax = $49 Input tax = $35 Net GST payable = $14 GST-Registered Wholesaler $700 + $49 (7% GST) Output tax = $70 Input tax = $49 Net GST payable = $21 GST-Registered Retailer $1000 + $70 (7% GST) End-consumer 1. GST and My Responsibilities Overseas Supplier

8. 1. GST and My Responsibilities What are the Responsibilities of a GST-registered Business? • A GST-registered business must: • Submit returns and pay tax in a timely manner • Submit accurate GST returns • Maintain listings and keep business and accounting records for 5 years • Assist in GST audit • Display prices with GST • Reflect GST registration number on all tax invoices and receipts • Inform IRAS of changes to the business • Account for GST on business assets held at point of de-registration • In the subsequent parts of this course, you will learn how to fulfill these 8 basic responsibilities.

9. 2. Charging GST on Sales • Scope of Tax • Value of Supply Subjectto GST • Absorbing GST • Accounting for GST • Bad Debt Relief Claim Relevant e-Tax Guides: “GST: General Guide For Businesses” “GST: Time of Supply Rules” “GST: A Guide on Export” “Do I Need to Register?” “Accounting for GST Absorbed by Businesses”

10. 2. Charging GST on Sales Scope of Tax GST-registered businesses should charge GST on anysupply of goods or services if it is : i) made in Singapore ii) a taxable supply iii) made by a taxable person iv) in the course or furtherance of the business

11. 2. Charging GST on Sales Goods or Services?

12. 2. Charging GST on Sales i) Is the supply made in Singapore? Goods are supplied in Singapore if the goods are in Singapore or from Singapore at the time of supply Services are supplied in Singapore if the supplier belongs in Singapore

13. 2. Charging GST on Sales ii) Is the supply taxable? Taxable supply refers to the supply of goods or services made in Singapore, other than an exempt supply and out-of-scope supply. Examples of types of supplies

14. 2. Charging GST on Sales iii) Who is a taxable person? A person that is GST-registered or is required to be registered for GST under the GST Act.

15. 2. Charging GST on Sales GST registration liability • Registering for GST is compulsory when: • Your taxable turnover for the current quarter and the past 3 quarters is more than $1 million (unless you are certain that your turnover in the next 12 months will not exceed $1 million); or • You have started or intend to start making sales, and you can reasonably expect your taxable turnover to exceed S$1 million in the next 12 months • Otherwise, the business need not register for GST, unless it chooses to do so voluntarily • Additional responsibilities for voluntarily registered businesses • remain GST-registered for at least 2 years • make taxable supplies within 2 years if you have not started making taxable supplies at the point of registration • The Comptroller may also impose other conditions and may cancel your GST registration if any of the conditions are not met.

16. 2. Charging GST on Sales • GST registration liability - Rules for Sole-proprietorship (Owned by an Individual) • Combine the turnover of all SPship businesses to ascertain the liability to register • GST registration is in the name of the SP, not the SPship business (i.e. Mr Tan owns ABC Company, GST registration will be in the name of Mr Tan) • All SPship businesses under the SP’s name will be GST-registered. This includes any SPship business which you may set-up in the future • SP should use the same GST registration number to charge GST for all existing SPship businesses and any newly set-up SPship business • Notify IRAS of any new SPship business by sending in its ACRA Business Profile

17. 2. Charging GST on Sales GST registration liability - Rules for Sole-proprietorship (example) You are a sole proprietor with 2 sole-proprietorship businesses (Business A and B) and you drive a taxi on a part-time basis.  In the past 12 months, the turnover of Business A is $500,000,  the turnover of Business B is $490,000 and the income derived from your taxi driving is $30,000. Total Turnover/Income = $500,000 + $490,000 + $30,000 = $1,020,000 As the combined turnover (including the income from the taxi driving) has exceeded $1 million, you must register for GST immediately if you can reasonably expect your total turnover to be more than $1 million for the next 12 months.

18. 2. Charging GST on Sales • GST registration liability - Rules for Partnership (PP) • GST registration will be in the name of the respective PP businesses • Once your PP is GST-registered, you are required to account for output tax on all taxable supplies in connection with any separate businesses comprising of the same partners.

19. 2. Charging GST on Sales GST registration liability - Rules for Partnership (example) You and Mary are partners and have 2 partnership businesses (Business C and D). You also have another partnership business (Business E) with John. In the past 12 months, the turnover of Business C is $200,000, the turnover of Business D is $300,000 and the turnover for Business E is $600,000. Business Turnover (partnership with Mary) = $200,000 + $300,000 = $500,000 As the combined turnover for all partnership businesses with the same composition of partners is $500,000, you need not register for GST if you can reasonably expect your business turnover to be less than $1 million for the next 12 months. However, you may wish to apply for voluntary GST registration.

20. 2. Charging GST on Sales iv) What is meant by in course or furtherance of the business? Activities carried out in connection to the business either directly (e.g. sales of trading stocks) or incidentally (e.g. recovery of expenses from a related company).

21. APPLICATION EXERCISE   

22. APPLICATION EXERCISE N (out-of-scope) N Y Y Y (0%) Y Y Y Y (7%) Y Y Y

23. APPLICATION EXERCISE N (exempt) N N Y Y (7% - commercial) (Exempt - residential) Y (Commercial) Y Y N (out-of-scope) N Y Y

24. 2. Charging GST on Sales Value of Supply Subject to GST

25. 2. Charging GST on Sales

26. 2. Charging GST on Sales • Absorbing GST • To maintain competitiveness or as a form of goodwill, you may choose to ‘absorb’ the GST payable by your customer • The sum of money received from your customer will be treated as inclusive of GST • The GST to be accounted for is based on the tax fraction of 7/107 of the consideration received • Example: You sell a good at $100. If you choose to absorb the GST, $100 is treated as inclusive of GST. • Value of Supply = $100 X 100/107 = $93.46 • GST = $100 X 7/107 = $6.54

27. 2. Charging GST on Sales • Accounting for GST • In general, you should account for GST at the earlierof the following events: • Invoice issued; or • Payment received • For more information, you may refer to the e-Tax Guide “GST: Time of Supply Rules”. BASIC TAX POINT & 14-DAY RULE NOW REMOVED • Note: Prior to 1 January 2011, the general time of supply rule is the earliest of the following events: • Goods removed/made available or Services performed; (“Basic Tax Point”) • Tax invoice issued (subject to 14-day rule); or • Payment received

28. Invoiced for $11,000 and received part-payment of $5,000 Received remaining payment of $6,000 Goods removed (Value = $11,000) 01/01/12 31/01/12 01/02/12 APPLICATION EXERCISE Total value of goods sold = $11,000 Account for GST on: 31/01/12 (on $11,000)

29. 2. Charging GST on Sales Bad Debt Relief Claim A bad debt situation occurs when money owed cannot be recovered. Bad debt relief claim can be made on output tax that was previously accounted for and paid to IRAS if you meet the conditions below: Please complete the "Self-review of Eligibility to Claim Bad Debt Relief" form (www.iras.gov.sg> Quick links> Forms>GST) before making the claim in your current GST return. Do not submit the form to IRAS unless requested.

30. 3. Accounting for GST on Other Transactions • Giving Goods and Services for Free • Fringe Benefits to Staff • Recovery of Expenses • Sale of Business/Capital Assets • Trade-in Transaction Relevant e-Tax Guides: “GST: General Guide for Businesses” “Fringe Benefit” “Use of Business Premises By Third Party for Free” “GST: Guide on Reimbursement and Disbursement of Expenses”

31. 3. Accounting for GST on Other Transactions • Giving Goods and Services for Free • Giving Services for Free • No output tax needs to be accounted for as there is no supply • Giving Goods for Free (i.e. Free Gifts) • Prior to 1 Oct 2012 • Deemed as supply of goods • Output tax to be accounted for based on the OMV of goods in the following situations: • GST was incurred on purchase of goods; • Cost of gift > $200; or • Cost of gift ≤ $200, but 3 or more gifts were given to the same person within 3 months • From 1 Oct 2012 • You only need to account for output tax if the cost of each gift exceeds $200; and • If input tax on those goods has been allowed to you.

32. 3. Accounting for GST on Other Transactions • Fringe Benefits to Staff • Prior to 1 Oct 2012 • Goods and services given free to all employees • Output tax to be accounted for on goods given free except in the following situations: • Cost of gift ≤ $200 and it does not form a series of 3 or more gifts (regardless of value) given to the same person within 3 months; • It is a free supply of food or accommodation • Output tax to be accounted for if GST was incurred on the purchase • With effect from 1 Oct 2012 • Output tax to be accounted for on goods given free except in the following situations: • A free supply of food or accommodation; • Gifts of value not more than $200 each; or • Gifts for which no credit for input tax has been allowed on its purchase.

33. 3. Accounting for GST on Other Transactions • Recovery of Expenses • Prior to 31 May 2013 • A recovery of expense is considered as a separate supply for GST purposes (i.e. a reimbursement) and hence, subject to GST, as long as it does not meet the following conditions for disbursements: • Conditions for disbursements • The other party is responsible for paying the supplier; • The other party knows that the goods or services would be provided by that supplier; • The other party authorised you to make the payment on his behalf; • The other party is the recipient of the goods or services; • The payment is separately itemised when you invoice the other party; • You recover only the exact amount paid to the supplier; and • The goods or services paid for are clearly additional to the supplies you make to the other party.

34. 3. Accounting for GST on Other Transactions • Recovery of Expenses • With effect from 31 May 2013 • GST treatment for any recovery of expenses will be as follows:

35. 3. Accounting for GST on Other Transactions • Sale of Business/Capital Assets • GST-registered businesses must account for GST on all taxable supplies made • GST is chargeable on the sale of business/capital asset though it is not considered the main business activity • For example, sale of office equipment, factory or old furniture is subject to GST

36. 3. Accounting for GST on Other Transactions • Trade-in Transaction • Treated as 2 separate supplies for GST purpose • GST must be accounted for on the value of the 2 separate supplies • Incorrect to account for GST on the net difference only

37. 3. Accounting for GST on Other Transactions

38. 4. Claiming GST on Business Purchases and Imports • Conditions for Claiming Input Tax • Disallowed Expenses • Claiming Input Tax • Claiming Input Tax on Purchases Paid in Foreign Currency • Situations where Input Tax Claims are Disallowed • Claiming Pre-registration Input Tax • Repayment of Input Tax Relevant e-Tax Guides: “GST: General Guide For Businesses” “Exchange Rates for GST Purposes” “GST Guide on Imports”

39. 4. Claiming GST on Business Purchases and Imports Conditions for Claiming Input Tax • You can claim GST incurred on your purchases as input tax if: • You are GST-registered; • The goods or services have been supplied to you or the goods have been imported by you; • The goods or services are used or to be used for the purpose of your business; • The input tax is directly attributable to taxable supplies or out-of-scope supplies which would be taxable if made in Singapore; • The input tax claims are supported by tax invoices/ simplified tax invoices addressed to you. For imports, the claims should be supported by import permits showing you as the importer of the goods; and • The input tax claims are not disallowed expenses under Regulation 26 and 27 of the GST (General) Regulations

40. 4. Claiming GST on Business Purchases and Imports • Disallowed Expenses • You are not allowed to claim input tax incurred on the following expenses: • Club subscription fees • Medical and accident insurance premiums* • Medical expenses* • Benefits provided to family members/relatives of your staff • Cost and running expenses of motor cars • Any transaction involving betting, sweepstakes, lotteries, fruit machines or games of chance *Except those obligatory under the Work Injury Compensation Act or under any collective agreement within the meaning of the Industrial Relations Act.

41. 4. Claiming GST on Business Purchases and Imports • Claiming Input Tax • Tax invoices and import permits are the primary documents for input tax claim and must be maintained to support the claim • Other relevant documents like payment evidence, invoice from overseas supplier etc. must also be maintained • Import permits should reflect your company as the importer of the goods • Input tax to be claimed in the accounting period corresponding to the date shown in the tax invoice and import permit

42. 4. Claiming GST on Business Purchases and Imports • Claiming Input Tax on Purchases Paid in Foreign Currency • For invoicing in foreign currency, your supplier must convert the following items in the tax invoice into Singapore dollars using an approved exchange rate for GST purposes: • - Total amount payable excluding GST; • - Total GST payable; and • - Total amount payable including GST • You should claim the GST incurred based on the Singapore dollar amount shown on the tax invoice

43. 4. Claiming GST on Business Purchases and Imports Situations where Input Tax Claims are Disallowed

44. APPLICATION EXERCISE No No Yes (For business purposes only)

45. 4. Claiming GST on Business Purchases and Imports Claiming Pre-registration Input Tax For purchases made before your GST registration, you can claim the GST incurred if all the following conditions are satisfied:

46. 4. Claiming GST on Business Purchases and Imports Claiming Pre-registration Input Tax • How to claim? • Download and complete the “Self-Review for Eligibility to Claim Pre-Registration Input Tax” form (www.iras.gov.sg > Quick links > Forms > GST) • Do not submit the form to IRAS unless requested. • Claim pre-registration input tax only in your first GST F5 return. If the GST F5 return has been submitted, to request for GST F7 to amend the GST F5 submitted.

47. APPLICATION EXERCISE • GST registration date : 01/01/2013 • GST Incurred on Goods: • Invoice Date DescriptionAmountClaimable? • 01/11/12 Purchase of stocks which were sold on 15/1/13 • 30/11/12 Utilities charges • iii) 15/12/12 Office rental • iv) 01/12/12 Goods imported and • sold on 31/12/12 Yes $1,000 No $300 $2,500 No No $900

48. APPLICATION EXERCISE GST registration date : 01/01/2013 GST Incurred on Services: Invoice Date DescriptionAmountClaimable? v) 01/05/12 Management fee $1,000 vi) 30/11/12 Consultancy fee $2,000 vii) 01/11/12 Commission paid $500 for goods sold on 01/11/12 No Yes No

49. 4. Claiming GST on Business Purchases and Imports Repayment of Input Tax • If you have not paid your supplier within 12 months from the due date of payment but have claimed the GST as input tax in your GST F5 return, you are required to repay the GST claimed • Do so in the first GST F5 after the 12-month period by: • Reducing the value of your taxable purchases (Box 5, “Value of taxable purchases”); and • Reducing the value of the input tax claim (Box 7, “Input tax and refunds claimed”).

50. 5. Price Display, Invoicing and Record-keeping • Displaying Prices • Invoicing Customers • Keeping Records Relevant e-Tax Guides: “GST: General Guide For Businesses” “Exchange Rates for GST Purposes” “Basic Record Keeping Guide for GST-registered Businesses” “Keeping Machine-sensible Records and Electronic Invoicing” “Keeping of Records in Imaging Systems”