Starting from 1 January 2019, customer accounting for prescribed goods is mandatory required under the GST regulations. This is applicable to the supplies of certain prescribed goods acquired by a GST-registered customer intended for business use, provided that it is (a) a local sale of prescribed goods with a GST-exclusive value of over S$10,000 and (b) not an excepted supply.
Customer accounting transfers the responsibility of GST accounting from the seller (or supplier) to the buyer (or customer). The changes are aimed to counter non-reporting and other fraud schemes where the supplier or seller absconds with the collected GST.
Under the Customer Accounting (CA) scheme, the sellers are not allowed to charge and collect GST from their customers. They are, however, required to issue a customer tax invoice that reflects the customer’s GST registration number and a statement to inform the customer of his/her GST accountability, and the application of CA in that purchase. The seller will also have to report the transaction in his GST returns.
What are the Prescribed Goods?
The application of CA is limited to the prescribed goods, which include but are not limited to the following:
- Mobile Phones – Examples include smartphones, Blackberry, or tablets that can transmit and receive calls and messages over a cellular network. The purchase of a mobile phone is, however, excluded from customer accounting if it comes with a post-paid mobile subscription plan by a local telecommunication service provider. Satellite phones, walkie-talkies, smartwatches, mobile landlines, phones over 17.5 cm in screen size, and smartphone accessories such as chargers, screen protectors, and batteries are not included in the CA scheme.
- Memory Cards – This category includes memory sticks, Secure Digital (SD) cards and CompactFlash. The exclusions are solid state drive (SSD), thumb drive, dual in-line memory module (DIMM), random access memory (RAM), portable external hard disk, hard disk drive (HDD), and other smart cards with embedded chips such as ATMs, SIM cards, and credit cards.
- Off-the-Shelf Software – The software included in this category are those that are not specifically customized for the customer. Such software is stored in a CD or similar storage device; or the product can be accessed through a product or license key, activating or other similar code which is provided as part of the purchase. Prescribed goods for CA include software sold in physical boxed packaging like anti-virus, accounting, gaming, design tools, etc. Pre-installed software is not prescribed for CA. Software back-ups stored in CD or similar storage device, Xbox Live, software downloadable from the internet (whose key or code for access is provided via email), and PlayStation Plus are examples of software not qualified for CA.
‘Excepted Goods’ which are not subject to CA, are the supplies of goods made under:
- Gross Margin Scheme – The computation of GST is based on the gross margin, not the full value, of the goods supplied. This scheme is applicable if (1) the primary business activity is dealing with used goods and (2) the second-handed goods are purchased free of GST.
- Approved Third Party Logistics (3PL) Company Scheme – Under certain conditions, no import duty or GST is applicable on the supplies of goods from the overseas customers of these approved logistics companies.
- Approved Refiner and Consolidator Scheme – Either the approved refiner or consolidator can enjoy the certain GST benefits, which are specially designed to ease cash flow and relieve indirect taxability on refining activities for investment precious metals (IPM).
- A deemed taxability arising from the transfer or disposal of goods at no cost.
When to Apply Customer Accounting
To apply CA, the following conditions must be met;
- The customer must be a GST-registered person;
- The purchase of prescribed goods is conducted in the ordinary course of a business; and
- The value of the prescribed goods exceeds S$10,000.
Connect with us today to learn more about customer accounting and how this may affect and/or apply to your business. We look forward to helping you identify your business and personal needs, and providing you with efficient and holistic solutions.