Cash Accounting Scheme

This scheme aims at increasing the cash flow of small-scale businesses whose yearly sales is not more than S$1 million. In addition to easing the cash flow of your business, it also renders the benefit of easing the compliance of your business.

So How Does This Scheme Ease the Cash Flow of Your Business?

As per this scheme, you will report output tax only after your customers have made their payment to you. You will make your input tax claim only after you’ve made the required payment to your concerned suppliers.

In case you aren’t operating under this scheme, you should report for output tax depending on the rules in relation to *time of supply which is applicable to every business which has registered for GST.

In general, you should report for output tax either when you received the payment or when you issued an invoice. Whichever amongst the two occurred earlier will be considered. With this, you might end up paying & reporting for output tax prior to getting your payment from your customer.

(* The time of supply rule decides when you must declare your supplies & report for GST charges in your respective GST return.)

Let’s See How This Scheme Eases Compliance of Your Business

With this scheme, your business only needs to maintain a record of when it receives & makes a payment for its GST reporting purposes thereby easing the compliance factor.

How to Apply for This Scheme?

You will need to make a letter submission to the GST Comptroller with the details listed below:

  • An explanation regarding your supplies which are taxable.
  • The anticipated worth of your supplies which are taxable for the following 12 months.
  • The accounting system type which was utilised, examples being manual/ off-the-shelf/customised accounting software. In case you’ve used an off-the-shelf accounting software, you will need to mention the software’s name.

What is the Eligibility Criteria for This Scheme?

  • Your business is GST-registered on a voluntary basis.
  • You don’t anticipate that the worth of your supplies (which are taxable) will cross S$1 million for a period of 12 months post scheme usage.
  • You don’t have any GST return which is unfiled or has GST tax which is unpaid.
  • For 3 years prior to your application date, you were not:
    • Convicted in relation to an offence/acknowledged a composition offer under the Customs Act or the GST Act.
    • Charged with a penalty as per the GST Act (Section 48).
    • Having been withdrawn from the Cash Accounting Scheme.

How Long Does it Take to Get the Approval for This Scheme?

Your application will be approved if IRAS is convinced that because of the volume/value/nature of your taxable provisions & your accounting system’s nature, it is relevant for your business to implement this scheme.

Upon your application being approved, you’ll be intimated about an effective date on which you’ll be allowed to initiate this scheme. Usually, an effective date will be the commencement of a stipulated accounting term. On approval, your business will be under the scheme for 3 years. Also, you will continue to stay on the scheme for 3 years even if your supplies which are taxable are more than S$1 million per year during the 3-year period.

Other Questions You Might Have

Q. How to fill my return for GST according to the Cash Accounting Scheme?

A. You will have to fill in your return with amounts depending on the payments you’ve made and received. The value accounting for your purchases that are taxable as well as your supplies should not include any purchases or supplies with respect to which you’ve not made or received any payment.

Q. Is this scheme applicable even when I enter into a conditional sale, hire purchase, or a credit sale agreement with my customer?

A. No, this scheme is not valid for sales you’ve made under a conditional sale/hire purchase/credit sale agreement. You will be accountable for GST depending on the supply’s entire value when your initial invoice is issued or when you received your customer’s first payment, whichever occurs earlier will be considered.

Q. What will happen if I decide to discontinue my business/opt for deregistering from GST?

A. You will need to file a return for GST is less than 2 months to report for & make the GST payment on the supplies you’ve made/received within the last 12 months during which you have not been accounted for because you were under the Cash Accounting Scheme.

Q. What will happen when I decide to either transfer my entire business or a part of it to another party as a business continuity initiative?

A. When you initiate your business transfer partially or completely to a concerned transferee and:

  • In case the transferee is not GST-registered and isn’t liable for GST registration, you will need to file a return for GST in less than 2 months to report for & pay GST charges on supplies you’ve made & received within the last 12 months during which you were not accounted for.
  • In case a transferee is liable for GST registration, they will account for & make a tax payment as if they were authorised to exercise the scheme with respect to supplies made & obtained from your end before the business transfer date.

In case a transferee intends to utilise the scheme on supplies owned by him or her, he or she needs to apply for this scheme individually.

Q. Under what circumstances IRAS can disapprove your application?

A.  IRAS might not sanction approval in view of revenue protection under certain scenarios.

Other Schemes Available

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