GST on Customer Accounting for Prescribed Goods

GST: Customer Accounting for Prescribed Goods

The Goods and Service Tax (GST) is a value-added tax placed on goods and services. The GST is borne by the consumer, it is however remitted to the government by the seller/ business selling the goods and services. This tax is usually added to the price of the product or service, and a customer who buys the product pays for the sales price as well as the GST. The GST portion is then collected by the business and remitted to the government. This source of government revenue is also referred to as Value-Added Tax (VAT) in some countries, an estimated 160 countries have adopted this tax system since its first implementation by France in 1954.

Customer accounting is a special accounting method implemented by IRAS, aimed at shifting the reporting and collection of GST from the seller to the buyer (which is also a GST registered company) in order to address fraudulent collection of GST by sellers. This approach is implemented to counter the Carousel effect on GST Fraud where buyer claim GST refunds and seller evade the GST by exporting the goods and in some cases it is merely a paper work where no goods being exported. Customer accounting for prescribed goods took effect from 1 January 2019 and is aimed to deter potential fraud schemes where the seller disappears with the GST collected.

Prescribed Goods under this scheme

  • Mobile phones
  • Memory card
  • Off-the-shelf software

Customer Accounting for Prescribed Goods

Company will only be required to adopt the Customer accounting GST scheme when the sales of good falls under the prescribed goods of more than S$10,000. With customer accounting, the GST-registered customer will be responsible to account for the purchases and submit the output tax payable on behalf of the GST-registered supplier.

The GST-registered supplier will hence only collect the GST-exclusive price of the prescribed goods and issue a valid tax invoice with the following additional details to the GST-registered customer:

      • Customer’s GST registration number.
      • A statement: “Sale made under customer accounting. Customer to account for GST of S$X.” or “Customer accounting: Customer to pay GST of $X to IRAS.”– $X here refers to the amount of output tax payable on the supply of the prescribed goods for which the GST-registered customer will account on behalf of the GST-registered supplier.

The GST-registered supplier should only report the GST-exclusive price of the prescribed goods sold as standard-rated supplies in his GST return. Hence, no output tax payable is to be reported in respect of such sales.

If non-prescribed goods are in the same invoice with the prescribed goods, GST should be charged for the non-prescribed goods and customer accounting applied to the prescribed goods. To make it easier and to avoid mix-ups, it is advisable to have a separate invoice issue for the non-prescribed goods.

Businesses/ sellers that are not trading on prescribed goods but do make occasional purchases of such goods exceeding SGD10,000 for their own business use may seek approval from the IRAS to be exempt from customer accounting if certain prerequisite conditions are satisfied.

Businesses are also advised regarding of sales straddling the implementation date of 1 January 2019. Customer accounting is also applicable for prescribed goods delivered before 1 January 2019 whose tax invoice is only issued and payment received on or after 1 January 2019.

 

 

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