Update on Customer Accounting on Prescribed Goods

Impending rule change

Proposed changes will shift the responsibility to account for output tax on the supply of prescribed goods from the supplier to the customer. These changes are to take effect from 1 January 2019. As a result, it is imperative for GST-registered businesses that sell and purchase prescribed goods (in other words, mobile phones memory cards, and off-the-shelf software) to ensure that their accounting system will be able to support the new GST reporting rules.

'Customer accounting' applies on the sale of prescribed goods made to a GST-registered customer if the value of the sale (excluding GST) exceeds SGD 10,000 on a single invoice. The following are specifically excluded from the customer accounting rules:

• Supplies of goods made under the Gross Margin Scheme;
• Supplies of goods made under the Approved Third Party Logistics Company Scheme or the Approved Refiner and Consolidator Scheme to an approved/specified person; and
• Deemed taxable supplies of goods arising from transfer of goods for no consideration. Businesses that make occasional purchases of prescribed goods may seek approval from the Comptroller of GST to be exempt from applying the customer accounting requirements, if certain conditions are met.

What affected businesses must be aware of

GST-registered businesses (both suppliers and purchasers of prescribed goods) should take note of the following, come 1 January 2019:

Suppliers

• Check the registry of customers to determine whether they are GST-registered.

This can be done via the IRAS website at www.iras.gov.sg.

• Ensure their tax invoice template for customer accounting includes a place for providing the customer's GST registration number and a statement that the 'Sale is made under customer accounting. The customer is to account for GST of SGD X' or 'Customer accounting: Customer to pay SGD X to IRAS' where SGD X refers to the output tax due on the supply that is to account for as output tax by the customer on behalf of the supplier.
• Collect only the GST-exclusive price on prescribed goods sold.

Customers

• Provide their GST registration number to suppliers when purchasing prescribed goods exceeding SGD 10,000 (excluding GST) for business purposes.
• Inform the supplier if the purchase of prescribed goods exceeding SGD 10,000 (excluding GST) is for non-business purposes so that the supplier can charge and collect the GST.

GST reporting

The table below illustrates the GST reporting applicable on the sale and purchase of prescribed goods where the customer accounting provisions apply.

Businesses should engage a software vendor or developer to understand if their system will be compliant with the new requirements or whether tweaks are required to ensure GST compliance.