6 December 2012
On 30 November 2012, the Inland Revenue Authority of Singapore (IRAS) issued an e-Tax Guide, “GST: Pre-Registration Claims on Goods and Services”.
Pre-registration GST is the GST that businesses incur on supplies of goods or services made to them before they are registered for GST. Businesses may sometimes incur GST on supplies acquired before they are registered for GST. Based on the general input tax claim conditions, such GST incurred before registration would not be claimable as input tax.
However, exceptional relief may apply to allow businesses to claim the GST that they had incurred before they are registered for GST if certain conditions are satisfied. The basis for allowing exceptional relief is that where the pre-registration supplies are acquired by businesses to make taxable supplies after their registration, these businesses should not be disallowed from claiming GST for the reason that the GST was incurred before their registration.
Where services and goods acquired by businesses before GST registration are used to make supplies straddling GST registration or where goods are partially consumed before registration, businesses need to apportion the GST incurred. Only the portion of GST that is attributable to the supplies made after registration is claimable.
In order to claim pre-registration GST, businesses have to satisfy both the general input tax claiming rules and additional rules under Regulation 40 of the GST (General) Regulations. Pre-registration GST incurred by businesses must satisfy the following general input tax rules in order for it to be claimable:
- The goods or services must have been supplied to the claimant or the goods have been imported by the claimant
- The goods or services are used or to be used for the purpose of the claimant’s business
- The goods or services must be used for the making of taxable supplies or out-of-scope supplies which would be taxable supplies if made in Singapore, in the course or furtherance of the claimant’s business
- It must not be disallowed under Regulation 26 and 27 of the GST (General) Regulations.
If the pre-registration GST does not satisfy any of the above conditions, it will not be claimable and there is no need to consider further whether it qualifies for the exception relief for pre-registration GST accorded under Regulation 40.
As the existing legislation for pre-registration input tax claims has been in place since April 1994, businesses are required to apportion their pre-registration input tax claims even prior to the publication of this Guide. However, the concessions mentioned in the Guide would be applicable only to businesses that are registered for GST on or after 1 December 2012.
This Guide aims to help businesses which may face difficulties in apportioning the GST incurred. Specifically, it provides the formulae to be used in apportioning pre-registration GST claims and gives examples to illustrate the application of these formulae. Qualifying conditions for claiming pre-registration GST, timing of claims and a set of FAQs are also provided in the Guide.
Source: This article was extracted from the Inland Revenue Authority of Singapore (IRAS) website. Visit www.iras.gov.sg for more information.