When Not to Charge GST in Singapore

Goods and Services Tax (GST) is a vital aspect of business operations in Singapore for GST-registered entities. However, there are specific scenarios where GST should not be charged. Understanding these exceptions ensures compliance with the Inland Revenue Authority of Singapore (IRAS) guidelines and avoids overcharging customers. This guide explains when GST is not applicable, including exempt supplies and out-of-scope supplies.

When Not to Charge GST

GST should not be charged in the following situations:

1. Exempt Supplies

   Exempt supplies refer to certain goods and services that are specifically excluded from GST under Singapore’s GST Act. Businesses should not charge GST on these supplies.
   
   Examples of Exempt Supplies

   • Financial Services:
     • Loan or mortgage interest.
     • Life insurance policies.
     • Provision or transfer of financial derivatives.
   • Sale or Lease of Residential Properties:
     • The sale or long-term lease of residential properties is GST-exempt.
     • This does not apply to properties approved for commercial or mixed-use purposes.
   • Investment Precious Metals (IPM):
     • Certain types of investment-grade precious metals are GST-exempt, provided they meet specific criteria such as weight, purity, and form.

2. Out-of-Scope Supplies

   Out-of-scope supplies are transactions that fall outside the scope of Singapore’s GST system. These include supplies that do not occur within Singapore or are not taxable under Singapore’s GST framework.
   
   Examples of Out-of-Scope Supplies

   • Sales Made Outside Singapore:
     • Goods sold and delivered to a location outside Singapore are considered out-of-scope and are not subject to GST.
   • Third-Country Transactions:
     • Transactions where goods are transported directly between two overseas locations without entering Singapore.
   • Supplies Between Members of a GST Group:
     • Transactions between members within the same GST group are disregarded for GST purposes.
   • Private Transactions:
     • Non-business transactions, such as the sale of personal belongings, are considered out-of-scope.

Key Differences: Exempt vs Out-of-Scope Supplies

How to Handle GST Exceptions

1. Classify Supplies Correctly:
   • Identify whether the supply is standard-rated, zero-rated, exempt, or out-of-scope.
2. Document Transactions:
   • Maintain clear records to justify why GST was not charged, including contracts, invoices, and delivery notes.
3. Review GST Returns:
   • Ensure accurate reporting of exempt supplies in the GST return (if applicable) and exclude out-of-scope supplies.
4. Consult IRAS Guidelines:
   • Refer to IRAS for detailed guidance on GST exceptions.

Common Mistakes to Avoid

1. Charging GST on Exempt Supplies:
   • Incorrectly charging GST on financial services or residential property transactions.
2. Misclassifying Supplies:
   • Failing to differentiate between exempt and out-of-scope supplies.
3. Inaccurate Reporting:
   • Including out-of-scope supplies in GST returns can lead to compliance issues.
4. Lack of Documentation:
   • Not keeping proper records to substantiate why GST was not charged.

How Apexia Corporate Advisory Can Help

Navigating GST regulations can be complex, particularly when determining when not to charge GST. At Apexia Corporate Advisory, we provide expert guidance to ensure compliance and optimize your GST processes. Our services include:

1. GST Advisory Services
   • Identify and classify supplies correctly as standard-rated, exempt, zero-rated, or out-of-scope.
2. GST Compliance Reviews
   • Conduct reviews to ensure accurate reporting and compliance with IRAS regulations.
3. Record-Keeping Assistance
   • Help maintain proper documentation to support GST decisions.
4. Training and Education
   • Provide training for your finance and accounting teams on GST requirements and exceptions.

Conclusion

Understanding when not to charge GST is crucial for GST-registered businesses in Singapore to ensure compliance and avoid penalties. By identifying exempt and out-of-scope supplies accurately, businesses can maintain proper tax practices and streamline their operations. For professional advice and assistance, contact Apexia Corporate Advisory today.