Goods and Services Tax. GST Guide For Motor Traders INLAND REVENUE AUTHORITY OF SINGAPORE

Transcription

1 Goods and Services Tax GST Guide For Motor Traders INLAND REVENUE AUTHORITY OF SINGAPORE

2 Published by Inland Revenue Authority of Singapore Revised Edition Nov 2004 Inland Revenue Authority of Singapore All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording without the written permission of the copyright holder, application for which should be addressed to the publisher. Such written permission must also be obtained before any part of this publication is stored in a retrieval system of any nature.

3 CONTENTS 1.0 INTRODUCTION IMPORTS / EXPORTS RETAIL SALES ACCOUNTING FOR GST BAD DEBT RELIEF SECOND-HAND VEHICLE TRANSACTIONS HIRE PURCHASE TRANSACTIONS AFTER SALE SERVICES 16 Appendix 1

4 1.0 INTRODUCTION Goods and Services Tax is a tax on - the supply of goods or services made in Singapore by a taxable person in the course or furtherance of his business; and - the importation of goods into Singapore. For more information on GST, please visit IRAS website at This guide is prepared to help motor traders understand how GST is applicable in the motor car industry. You may wish to download our related e-tax guide, GST Guide for Second- Hand Vehicles from IRAS website. 1

5 2.0 IMPORTS / EXPORTS 2.1 At the point of importation, how much GST do I have to pay? Who do I pay to? GST will be charged on the value of cost, insurance and freight (C.I.F) plus import duties. Example: CIF = $ 12,000 Customs Duty = $ 6,750 GST payable = 5% X (CIF + Customs Duties) = 5% X $ ( 12, ,750 ) = $ Singapore Customs will collect this amount of GST from you, the importer. 2.2 I have a repair workshop in Malaysia and most often, I will send motor vehicles needing repairs to this workshop. Must I pay GST to Singapore Customs when I subsequently re-import the motor vehicles? For re-importation of motor vehicles temporarily exported for repair and subsequently re-imported, no GST will be imposed at the point of re-importation, provided that the following conditions are met:- - the vehicles be re-imported within 3 months from the date of exportation; - the exportation and re-importation of the motor vehicles be registered by the Customs officer at the time of exportation and importation; - the motor vehicles are identified to the satisfaction of the Customs officer; and 2

6 - a certificate is produced from the repairer to the effect that new parts have or have not been added. Where new parts have been added, the relief hereby granted shall be applicable only to the original parts of the vehicles re-imported. Note : You must take up the relevant Customs Permit before sending the goods overseas for repair. 2.3 Do I have to account for GST on the importation of motor vehicles which are for repairs, modification or treatment if those vehicles are to be re-exported subsequently? No, provided that the following conditions are met:- - the motor vehicles are re-exported within 3 months from the date of importation; - the importation and re-exportation of the vehicles be registered by the Customs officer at the time of import and re-export; - the vehicles are identified to the satisfaction of the Customs officer; and - security is furnished to cover the tax on the vehicles imported. 2.4 Do I have to pay GST for spare parts which I import for use in vehicles to be repaired, modified or treated and such vehicles are subsequently to be re-exported? No, provided that the following conditions are met:- - the motor vehicles are re-exported within 3 months from the date of importation; - the importation and re-exportation of the vehicles be registered by the Customs officer at the time of import and re-export; - the vehicles are identified to the satisfaction of the Customs officer; and - security is furnished to cover the tax on the goods imported. 3

7 2.5 Do I need to pay GST at the point of importation when I import motor vehicles for purposes of demonstration, training or racing in Singapore? No, provided that the following conditions are met:- - they are not used on any public road; and - they are not to be sold or transferred to a person or organisation in Singapore. 2.6 Do I need to pay GST when I import motor vehicles for display and use at exhibitions, fairs or similar events? No, if an ATA Carnet or Carnet De Passage En Douane issued by an overseas organisation recognised by the Comptroller is produced. The vehicles must be exported within the validity period of the Carnet. The Comptroller may accept other permits in such form as the Comptroller shall direct and the goods are to be re-exported within 3 months from the date. The vehicles must then be exported within 3 months from the date of importation. If the vehicles are subsequently sold in the local market, GST will be chargeable. 4

8 3.0 RETAIL SALES 3.1 Do I have to charge GST on Certificate of Entitlement (COE), Additional Registration Fee (ARF), registration fee, and road tax? No. You do not need to charge GST on COE, ARF, registration fee, and road tax. 3.2 What other forms of charges by the Registry of Vehicles are not subject to GST? A list of the fees and charges is reproduced in Appendix I often offer discounts on COE to my customers. When I compute the value on which GST is to be charged, should I use the quota premium or the discounted price of COE? You should use the quota premium to arrive at the value on which GST is to be charged. This is because the Registry of Vehicle collects according to the quota premium. GST computation will thus be based on the face value of the certificates. Example Quota Premium = $ 24,000 Actual COE purchase price = $ 26,000 (say, from another car dealer) COE charges as reflected in the tax invoice = $ 15,000 Road Tax = $ 600 Registration Fee = $ 1,000 ARF = $ 23,477 Vehicle Price = $ 73,829 GST is imposed on (Vehicle Price - COE - Road Tax - Registration Fee - ARF) i.e 5 % on $( 73,829-24, ,000-23,477) = 5 % on $ 24,752 = $ 1,

9 3.4 Upon scrapping a vehicle that is less than ten years old, my customer will be issued with a certificate indicating the amount of PARF benefits. The PARF benefit could then be used to offset the ARF of a new car. When I compute the GST chargeable on the new car, is the full value of ARF or the net ARF which takes the PARF benefits into consideration used in the GST computation? The net ARF will be used for the GST computation since only this net figure is collected by the Registry of Vehicle. Example A customer produced a PARF certificate, indicating a rebate of $10,000. You thus quote him the following price, taking into consideration the rebate: Quota Premium = $ 24,000 Road Tax = $ 600 Registration Fee = $ 1,000 ARF = $ 23,477 Less PARF = $ 10,000 $ 13,477 Vehicle Price = $ 63,829 GST is imposed on $( 63,829-24, ,000-13,477) i.e 5 % on $ 24,752 = $ 1,

10 3.5 I am acting as an agent for general insurance companies. Upon selling a vehicle, I will introduce my client to the insurance companies for insurance coverage. Do I need to charge GST on the insurance premiums paid by my client? It depends. If the insurance companies are registered for GST, they will impose 5% on the insurance premiums. You do not need to charge another 5% on the premiums collected on behalf of the insurance companies. Example List price (excluding Quota Premium, = $ 30,000 ARF, registration fee and road tax) Aggregate of Quota Premium, ARF, registration fee and road tax) = $ 25,000 Insurance = $ 1,030 1 Total Consideration paid by customer = $ 56,030 GST Computation: 5 % on $( 56,030-25,000-1,030 ) = 5 % on $ 30,000 = $ 1,500 1 Note: 1. You do not charge GST on the insurance premium because you are only acting on behalf of the insurance company. 2. If the insurance company is registered for GST, the company will account 5/105 of $1030 i.e $49.05 as output tax. 7

11 3.6 If I sell a car for $50,000 cash to a customer who trades in a car for $20,000, how should I account for GST to the Comptroller? Here, there are 2 transactions. Firstly, your sale to a customer for $70,000 and secondly, the customer sells (or trades in) you a car for $20,000. Therefore, you will have to compute the amount of GST payable using $ 70,000 as the vehicle price. The appropriate amount of Quota Premium, ARF, registration fee and road tax is then deducted from the vehicle price to arrive at the value on which GST is imposed. 3.7 Do I need to account for GST when I subsequently sell off the demonstration cars at very low prices? Yes. The trade discount is acceptable based on the fact that the demonstration car has a lower market value. 3.8 Can I include the GST amount in my pricing? If you display, advertise, publish or quote in any manner the prices of your cars, the prices must include the tax chargeable. For example, you may advertise the price of a car as $ 78,000 (inclusive of ARF, COE, and GST). 3.9 Can I omit the GST amount on the receipts issued to my customers? Yes, the GST amount may be omitted in the receipt but the total amount payable, including the total tax chargeable with the words Amount payable includes GST must be shown on the serially-printed receipt bearing your GST registration number. 8

12 3.10 If I buy a Temporary Certificate of Entitlement (TCOE) from a dealer who is a GSTregistered company, am I liable to GST for my cost of TCOE? (The dealer would have a profit or value-added element.) You will have to pay GST on the profit or value-added element. Example Quota Premium for the month = $ 24,000 Dealer A sells it to you at the price of $ 24,500. He will charge you GST on the profit margin of $ 500. As a motor trader, you are entitled to claim this amount of GST paid as your input tax if you are registered for GST Are deposits subject to GST? In general, GST is accountable on the deposit that forms part payment of the price of the cars. However, GST is not payable if the deposits are to be paid over to ROV for the bidding of COE. Evidence of proof that the deposits are in fact fully remitted to ROV is therefore required. This would include the COE application forms or the receipts issued by the automated teller machines Do I have to charge my customers GST on handling charges, repossession charges, storage fees, collection fees and commission? Yes. If you are registered for GST, you must charge GST on all your supplies of services in the course of your business Do I have to charge GST on interest collected from late payment? Interest earned is an exempt supply and not subject to GST. However, you have to declare this amount in Box 3 of your GST returns. 9

13 4.0 ACCOUNTING FOR GST 4.1 If I have written-off part of my inventory, can I claim the corresponding amount of GST? The credit mechanism does not require supplies to be made before the corresponding GST previously incurred could be claimed as input tax credit. When you incur any input tax in respect of your inventory, input tax claims incurred on business purchases would have been made during the prescribed accounting period in which the input tax is being incurred. Therefore, there is no input tax credit to be claimed when you subsequently write-off your inventory. 4.2 Shortages and damages of imported parts below certain values are not claimable against the manufacturer. How can I get back the GST paid at the point of importation? At the point of importation, you would have paid GST based on the CIF (cost, insurance, freight) value declared. Thus, you would have claimed the input tax based on the inward permit in the prescribed accoounting period in which it was incurred. 4.3 What if my customers returned the spare parts or accessories previously sold to him? I would have already accounted for the output tax earlier. You can issue a credit note to offset the output tax previously accounted for. Effectively, no GST is collected where the transaction is cancelled. 4.4 Are intra-company transactions subject to GST? As the transactions are within the same entity, it is not subject to GST. 4.5 How do I charge GST on sales made to my employees? You can charge GST based on the selling price to your employees. If a discount is given, GST will be based on the discounted price. 10

14 5.0 BAD DEBT RELIEF 5.1 What happens if my customers have become insolvent and output tax was previously accounted for to the Comptroller of GST? You can claim GST relief on your bad debts if you meet the conditions and requirements under the GST (General) Regulations To ensure that you are eligible to claim this relief, please use the form Self-review of eligibility to claim bad debt relief. You can download this form from IRAS website at 11

15 6.0 SECOND-HAND VEHICLE TRANSACTIONS 6.1 What is the definition of "second-hand car"? For the purpose of GST, a second-hand car is a used motor vehicle which has been registered in Singapore. This definition excludes any used car which was foreign registered. (When imported into Singapore, the used car would be required to be registered and the owner will have to pay COE, ARF and other fees as if it is new). 6.2 How do I charge GST on second-hand vehicles? Scenario 1: If you first bought the vehicle from a non-taxable trader, you would not have paid any GST on the purchase. You have the option to use the Gross Margin Scheme or the Discounted Sale Price Scheme (to be described in scenario 2) to determine the amount of GST chargeable on your subsequent sale. Gross Margin Scheme specifies that GST will be charged on the value of A - B, where A is the consideration for which the vehicle is supplied; and B is the consideration for which the vehicle was acquired. If the Gross Margin Scheme is used, only receipts need to be issued to your customers. Therefore, your customers will not be making any input tax claims if you charged the supply based on the Gross Margin Scheme. Note : You have to write to the Comptroller of GST for approval to use the Gross Margin Scheme. This scheme is applicable only to Motor Traders. 12

16 Example: Customer A walked in to your shop and sold his car to you at $20,000. He did not charge you GST because he was not registered for GST. Subsequently, after some minor repair and repainting, you sold the car for $25,000 inclusive of GST. You will account for GST according to the Gross Margin Scheme. Therefore, output tax will be the tax fraction of $( 25,000-20,000 ), i.e 5/105 of $ 5,000 = $ Scenario 2: If you have bought the vehicle from a GST-registered trader, you will use the Discounted Sale Price Scheme. The Discounted Sale Price Scheme specifies that GST is charged on 50% of the sale price. The rationale of the Discounted Sale Price Scheme is to eliminate the element of COE and ARF, on which no GST was previously charged, from the selling price of the vehicle. If the Discounted Sale Price is adopted, you may issue a tax invoice if your customer is GST registered as he will make the input tax claims if it is a commercial vechicle. Example: Company B sold a vehicle to you for $ 20,000, inclusive of GST. After some repairing work and repainting, you sold the vehicle for $ 25,000 (excluding GST) to Company C. Since Company C is registered for GST, he requested for a tax invoice in order to support his claim of input tax. Therefore, the Discounted Sale Price Scheme would be used to calculate the amount of GST chargeable on the transaction i.e. 5% X 50% X $ 25,000 = $

17 6.3 If I am selling the second-hand car at a loss, do I need to account GST for the transaction? It depends. If you are charging GST using the Gross Margin Scheme, no GST will be charged on the trade loss. If the Discounted Sale Price Scheme is used, GST will still be charged at 50 % of the selling price. Example If customer A walked in and sold his car for $10,000 to you. After two years, the car remained unsold. Finally, you managed to find a company to buy over the car at $8,000. The company requested for a tax invoice. Under the Discounted Sale Price Scheme, GST will then be 5% X 50% X $ 8,000 = $ 200 Note : The Discounted Sale Price Scheme would apply even if you are not a Motor Trader. 14

18 7.0 HIRE-PURCHASE TRANSACTIONS 7.1 If I sell a car under a hire-purchase agreement, how do I account for GST then? Under a hire-purchase agreement, you are in fact selling the car to the finance company which sells it to your customer. The finance company will charge GST on the supply price of the car. That is to say, GST is not charged on the term charges if they are separately shown. 7.2 Are pre-payment charges in a hire-purchase agreement subject to GST? No. The prepayment charges are exempt. 7.3 If the finance company repossesses the car that has been sold under a hire-purchase agreement, how should the finance company account for GST? Repossession of the car under a hire-purchase agreement does not constitute a supply. Hence no GST is to be charged. When the finance company disposes of the car, this disposal is treated as being made by the hirer. Whether the supply is subject to GST will depend on the status of the hirer (i.e. whether the hirer is a taxable person). On the sale of the repossessed car, the finance company has to account for GST if the hirer is a taxable person. If the hirer is not a taxable person, no GST need to be charged on the sale of the repossessed car. Example You repossessed the vehicle from individual A (not GST-registered) when he defaulted in payment. Two months later, another buyer was found. You do not have to charge any GST on the second supply because the hirer (individual A) is not a taxable person. 15

19 8.0 AFTER SALE SERVICES 8.1 Do I need to charge GST on the free warranties that I offer to my customers? No, GST will not be charged on supply of goods and services under warranty. 8.2 The overseas principal who provides the warranty will in turn reimburse me for the repair works done. Do I then have to charge any GST for the services rendered to my principal? No. As the payment received from your overseas principal is compensatory in nature, no GST is chargeable. 8.3 As part of my sales promotion, I offer free accessories, eg tyre or seat covers to my customers. Do I need to account for GST on these free gifts? As the cost of the "free gifts" would have already been included in the price of the good sold, no GST is to be charged on these items again. 16

20 Appendix 1 1. Transfer of vehicle ownership fee 2. Road tax 3. Additional registration fee 4. New vehicle registration fee 5. Quota premium 6. Transfer of Preferential Additional Registration Fee (PARF) / Certificate of Entitlement (COE) Rebate 7. Fee for duplicate PARF/COE rebate 8. Fee for transfer of temporary Certificate of Entitlement (TCOE) 9. Fee for duplicate TCOE 10. Vehicle entry permit fee 11. Weekend Car (WEC) conversion fee 12. WEC conversion premium 13. WEC day licence 14. Fee for duplicate registration card 15. Fee for duplicate road tax disc 16. Fee for duplicate COE 17. Area licence fee 18. Fee from bidding of vehicle registration numbers 19. Fee for retention of registration numbers 20. Fee for extract from the register 21. RU vehicle seal - applicable to off-the-road vehicles such as forklifts used within flatted factories or warehouses

21 22. Towing fee 23. Public service vehicle (PSV) fee 24. Public transport (PT) licence fee 25. Omnibus licence fee 26. Temporary private hire car permit 27. Duplicate PSV licence 28. Duplicate PT licence 29. Duplicate Omnibus licence 30. Duplicate temporary private hire car permit 31. Weighbridge fee 32. Sale of weekend car seals