On 24 April 2017, IRAS has initiated a public consultation exercise to seek feedback from its Draft e-Tax Guide on GST-registered businesses dealing in prescribed goods on the implementation of customer accounting, so as to facilitate a smooth transition into customer accounting come 1 Jan 2018.
What is GST customer accounting?
IRAS is planning to implement GST customer accounting from 1 January 2018 to better address non-compliance relating to transactions of the prescribed goods – mobile phones, memory cards, and off-the-shelf software if the GST-exclusive value of the sale exceeds $5,000 in a single invoice.
If a GST-registered trader makes a taxable supply to a GST-registered customer, it is the GST-registered customer who will account for the output tax on the supply on behalf of the supplier. At the same time, the GST-registered customer will be bale to claim input tax on this purchase if it is for his business use and the making of his taxable supply.
De Minimis Threshold – $5,000
The new Customer accounting requirement is applicable only if the sales of the prescribed goods to a GST-registered customer for his business use exceeds the de minimis threshold of $5,000 in GST-exclusive value.. This means that if the sales do not exceed this threshold, the new Customer accounting requirement will not apply.
The GST-registered supplier should instead standard-rate the supply, account for the GST output tax and issue a tax invoice to his customer as before.
Discounts given on your sales
If a GST-registered supplier offers an unconditional discount on the price of the prescribed goods sold to his GST-registered customer, he should use the discounted GST-exclusive sale value to determine whether his supply exceeds the de minimis threshold of $5,000.
Where there is a contingent discount or delayed reduction in price, the pre-discount GST-exclusive value of the prescribed goods shown on the tax invoice should be used to determine whether the supply exceeds the de minimis threshold of $5,000. 8.2.3 Your supply of prescribed goods to the GST-registered customer will be subject to customer accounting if the discounted sale value or the pre-discount value shown on the tax invoice exceeds $5,000.
A single purchase order with multiple deliveries
For a single purchase order with multiple deliveries, if the GST-registered supplier issues only one tax invoice for all the deliveries, he will use the total GST-exclusive value of the prescribed goods shown in the tax invoice to determine whether the supply exceeds the de minimis threshold of $5,000.
On the other hand, if his normal commercial practice is to issue one tax invoice for each delivery made, such that multiple tax invoices are issued in respect of a single large purchase order, he should determine if customer accounting applies based on the GST-exclusive value on each of the invoices. However, if he would like to apply customer accounting to all the invoices even though some/all will not exceed $5,000 individually, he can do so provided the GST-exclusive value of the prescribed goods in the single purchase order exceeds $5,000; and both his GST-registered customer and he agree for customer accounting to apply in this manner.
Combined sales of prescribed and non-prescribed goods
When a GST-registered supplier makes a sale consisting of both prescribed and non-prescribed goods to a GST-registered customer, he needs to determine whether the total GST-exclusive sale value of all the prescribed goods sold (whether or not they are of the same type/nature) exceeds $5,000. The sale value of non-prescribed goods should not be included in this computation. Upon exceeding the threshold, the GST-registered supplier should apply customer accounting to the sale of the prescribed goods only and not to the non-prescribed goods.
If as a result of the returned goods, the GST-exclusive sale value of the prescribed goods is reduced to $5,000 or below, the GST-registered supplier should issue a credit note to cancel the original sale made under customer accounting and re-issue a tax invoice showing the revised sale value with GST charged (i.e., without applying customer accounting). He should also collect from his customer the GST chargeable on the revised sale value.
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