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The common questions
GST rate will increase from 3% to 5% from 1 January 2003. Are you
ready? Are you aware of the various transitional rules? Do you know
how long this transitional period will last? Have you asked the
following questions:
| • |
When I issue a tax invoice in January 2003
for goods delivered in December 2002, should I charge GST at
3% or 5%? |
| • |
Can I charge 3% GST if I issue the tax invoice
in December 2002? |
General rules for charging and reporting GST
Under section 11 of the GST Act, GST traders are required to charge
and report GST in their GST returns at the earliest of the three
events:
| • |
goods are delivered or services are performed; |
| • |
a tax invoice is issued; or |
However, if delivery of goods or services happens first and a tax
invoice is issued within 14 days of the delivery, the tax invoice
date is the time to charge and to report the GST in the GST return
(14–day rule).
The transitional rules
To assist GST traders to get ready for the change, the Inland Revenue
Authority of Singapore (IRAS) issued a publication called ‘GST Rate
Change - A Guide For GST-Registered Businesses’.
In addition to the general rules set forth above, the IRAS has
set out specific rules on what GST rate to use and when GST is to
be reported in the GST return in the transition to the new rate.
In a nutshell, transitional rules apply under the following situations:
| • |
Delivery of goods and services is made or
payment is received before 31 December 2002, but tax invoice
is issued after 31 December 2002 – you can charge GST at 3%.
|
| • |
Tax invoice is issued before 31 December
2002, but delivery of goods and services is made and payment
is fully or partially received after 31 December 2002 – you
need to issue a credit note and a new tax invoice at 5% GST
by 14 January 2003. |
| • |
Cheques presented to banks by 3 January
2003 will be considered as payment received before 1 January
2003. |
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Tips for businesses
in certain industries
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Traders
of goods - Summary of transitional rules which
are applicable to traders of goods:
| |
Goods delivered
and sold in
December 2002
|
Goods delivered and payment
received in
January 2003
|
| Tax
invoice issued |
In Jan 2003 within 14
days of delivery
|
In Jan 2003 after 14
days of delivery
|
In Dec 2002
|
| GST
rate |
3%
|
3%
|
3%
|
| Time
to report in GST return |
Jan 2003
|
Dec 2002
|
Dec 2002
|
| Credit
note required |
No
|
No
|
Yes, to be issued by 14 Jan
2003 to cancel the 3% GST invoice issued in Dec
2002
|
| New
tax invoice required |
No
|
No
|
Yes, to be issued by 14 Jan
2003 to charge 5% GST
|
| Time
to report adjustments |
N/A
|
N/A
|
Jan 2003
|
|
Restaurants, lounges
and 24-hr convenience stores
31 Dec 2002 - A great time to usher in the New Year for
most except retailers who open past midnight. To ease
accounting work and minimise disruptions to affected operators,
the IRAS has given a concession that 3% GST will be charged
until 7 a.m. on 1 January 2003. The cash registers and
accounting systems have to be ready to calculate 3% GST
in this manner. |
Professionals
(e.g. lawyers and accountants)
A consultant takes up an engagement in November 2002 for
which his services extend over to April 2003. Under normal
circumstances, the consultant will issue a tax invoice
to the client upon completion of the engagement. That
is, the consultant will issue a 5% GST invoice in April
2003. However, it is advisable that the consultant does
a valuation on his services performed before 1 January
2003. With such documentary evidence, the consultant could
charge GST at 3% on the part of services performed before
1 January 2003 when he issues the tax invoice in April
2003. |
Real estate
- Scenarios that are applicable to real estate management
offices:
| |
Maintenance
Fee for
December 2002 to February 2003 |
| Tax invoice issued |
In Dec 2002 |
In Dec 2002 |
| Full
payment received |
In Dec 2002 |
In Jan 2003 |
| GST
rate |
3% |
3% |
| Time
to report in GST return |
Dec 2002 |
Dec 2002 |
| Credit
note required |
No |
Yes, to be issued by
14 Jan 2003
to cancel the 3% GST invoice issued in Dec 2002
for Jan & Feb 2003 maintenance fee |
| New
tax invoice required |
No |
Yes, to be issued by
14 Jan 2003
to charge 5% GST on Jan & Feb 2003 maintenance fee |
| Time
to report adjustments |
N/A |
Jan 2003 |
|
Contractors
A contractor will collect a retention sum in 2005 for
a long-term construction project that stretches from September
2001 to August 2004. It is advisable that the contractor
conducts a valuation on that part of work performed before
1 January 2003. This is because the retention sum relating
to that portion of work performed before 1 January 2003
is subjected to 3% GST and not 5%. |
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Summary
During this transitional period, businesses may want to look at
every aspect relating to their billing operations and design a plan
so as to prepare for a smooth transition and compliance with the
GST Act.
Year published : 2002
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