Customer Accounting

From 1 Jan 2019, you are required to apply customer accounting on a relevant supply of prescribed goods made to a GST-registered customer for his business purpose.  A relevant supply is:

  • a local sale of prescribed goods whose GST-exclusive sale value exceeds $10,000
  • and is not an excepted supply.

The prescribed goods are mobile phones, memory cards and off-the-shelf software.
For the purpose of customer accounting:

  • A mobile phone is one that:
    1. can transmit and receive spoken messages over a cellular network (whether or not it has any other function), and
    2. has a screen size of 17.5cm or less, measured diagonally from the top corner to a bottom corner, excluding the bezel.

    It excludes a mobile phone sold with a mobile subscription plan.

  • A memory card is an electronic flash memory data storage device used for storing digital information, and excludes any flash drive with integrated USB interface.
  • An off-the-shelf software is one that is not customised for a particular customer and where:
    1. the software is stored in a CD or similar storage medium which is provided as part of the supply; or
    2. the software may be accessed by the use of a product key or licence key that is provided in a physical box packaging as part of the supply.

    It excludes any software that is preloaded on any hardware or computer, as part of the supply of the hardware or computer.

The excepted supplies are:

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

For customer accounting to apply, your customer must be a GST-registered person purchasing the prescribed goods in the course of carrying on a business.

If your sale includes both prescribed goods and non-prescribed goods/services, you should only use the GST-exclusive sale value of the prescribed goods to determine whether your supply exceeds the threshold of $10,000 for customer accounting to apply. Customer accounting does not apply to the sale of non-prescribed goods/services, regardless of its value.

Customer accounting shifts the responsibility to account for GST on the sale of prescribed goods from the supplier to the GST-registered customer. Thus you are not allowed to charge and collect GST from your customer if your sale is subject to customer accounting. However, you are still required to report the supply in your GST returns.

You are a GST-registered supplier making a relevant supply

If you make a relevant supply to a GST-registered customer, he will account for the output tax on this supply on your behalf.

You must issue a customer accounting tax invoice to your customer, showing the following details in addition to the details required for a tax invoice:

  1. Your customer’s GST registration number;
  2. A statement to inform the customer that your sale is subject to customer accounting, that he has to account for the GST on the sale and the GST amount.

You are required to report the GST-exclusive value of the prescribed goods sold in Box 1 “Total value of standard-rated supplies” of your GST return based on the normal time of supply rules.  As you are not allowed to charge GST on a relevant supply made to a GST-registered customer, there is no output tax to be reported under Box 6 “Output tax due”.

For an overview of how your sales of prescribed goods will be affected under the new rule, please refer to flowchart.

You are a GST-registered customer receiving a relevant supply

If you (i.e. the customer) receive a relevant supply, you will account for the GST chargeable on your supplier’s behalf as your output tax.  You will report the GST-exclusive value of the prescribed goods purchased in Box 1 “Total value of standard-rated supplies” and the GST amount in Box 6 “Output tax due” of your GST return based on the normal time of supply rules.

You will be able to claim the input tax on the purchase if it is for your business use and the making of your taxable supply.  You will report the value of the prescribed goods purchased in Box 5 “Total value of taxable purchases” of your GST return and claim the GST as your input tax in Box 7 “Input tax and refunds claimed” if you satisfy the input tax claiming conditions which includes holding a valid customer accounting tax invoice.

For an overview of how your purchases of prescribed goods will be affected under the new rule, please refer to flowchart.

For more information, please refer to e-Tax Guide GST: Customer Accounting for Prescribed Goods. here.

Above article is found in IRAS website.

To comply with Customer Accounting issues, simply consider upgrading your accounting solution.

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