Customer Accounting for GST

Customer accounting is an accounting method implemented by IRAS which shifts the reporting and collection of GST from the seller to the buyer to address fraudulent collection of GST by seller. This is in response to the Carousell GST Fraud where Tax Investigation by IRAS was carried out to look into this tax evasion scheme. Customer accounting needs to be applied with effect from 1 January 2019 if:

  1. You are a GST registered business;
  2. Your value of your sale of standard-rated prescribed goods before GST exceeds SGD10,000;
  3. Your customer is a GST registered business; and
  4. the supply of the prescribed goods is not an excepted supply.

Prescribed goods are mobile phones, memory cards and off-the-shelf software.

Excepted supplies are:

  1. Supply of goods made under the Gross Margin Scheme
  2. Supply of goods made under the Approved Third Party Logistics Company Scheme or Approved Refiner and Consolidator Scheme to an approved/specified person; and
  3. Deemed taxable supply of goods arising from the transfer or disposal of goods for no consideration.

Customer accounting shifts the GST reporting and collection from the seller to the buyer. It aims to avoid a situation where the seller absconds with the GST output tax collected but businesses further down the supply chain continue to claim the GST input tax.

Invoice for Customer Accounting

When customer accounting is applicable, the seller of prescribed goods is not supposed to charge GST on the sale of prescribed goods.

The seller must include the following in the tax invoice in addition to what is required in a typical GST invoice:

  1. GST registration number of customer; and
  2. State that:
  • “Sale made under customer accounting. Customer to account for GST of $ABC.”; or
  • “Customer accounting: Customer to pay GST of $ABC to IRAS.”,

where $ABC refers to the amount of output tax due on the prescribed goods supplied to the customers (i.e. to be accounted by the customers).

 

If you have non-prescribed goods in the same invoice as the prescribed goods, you should charge GST for the non-prescribed goods and apply customer accounting to the prescribed goods. To avoid confusion, it is advisable to have a separate invoice issue for the non-prescribed goods.

Invoice format for Customer Accounting

Reporting of GST in Form F5 for Customer Accounting

Sellers still need to report the standard-rated taxable supplies in Box 1 of Form F5. However, they need not report the GST output tax in Box 6 since the GST is accounted for under customer accounting and not collected by the sellers.

Buyers who received the GST invoice under customer accounting must report the standard-rated taxable supplies of the prescribed goods in Box 1 of Form F5 and report the GST of the prescribed goods in Box 6 of their Form F5. However, they can claim the same GST under Box 7, input tax and refunds claim, with the prescribed goods purchased in Box 5 as taxable purchases.

Transition Period

For the transition period of customer accounting, your sale will be subject to customer accounting if your tax invoice is
issued and payment received on or after 1 Jan 2019.

Customer Accounting for GST Purposes

Tax Services

If you are facing any IRAS Tax Investigation issues, you know that we are the right tax advisor to approach to resolve your tax issues with IRAS.

IRAS Tax Audit is frequently performed to deter carelessness in filing a tax return and helps to maintain a high tax compliance level.

Occasionally you may receive a letter from IRAS asking you for explanation and supporting documents. Make sure to reply it with great care to avoid future tax audit and investigation by IRAS.

If you are not sure if your business and personal tax affairs are in order, it may be time to perform a review and uncover any errors for disclosure to IRAS voluntarily so that you face lighter punishment.

Nothing beats getting the tax filing right at the very beginning. The best solution to IRAS Tax Audit and Investigation is to prevent errors from happening by getting a qualified tax person to file your taxes.

For Singapore companies looking to set up business operations in Labuan, you may read more about Labuan Offshore Company and Labuan Tax here.

Tax Advice

Whether it is corporate tax, individual tax, GST or withholding tax issues, sometimes it can be very uncertain. Appoint a tax consultant to look at it if you are in this situation.

Foreigners who are looking for company secretarial and tax services so that they can set up a company in Singapore, we offer such services.

Shifting the GST reporting obligation to the buyer with Customer Accounting

Let our GST Consultants prepare you for IRAS GST Customer Accounting

Customer Accounting Advice by GST Consultants

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email@ataxadvisor.com.sg