Gross Margin Scheme

If you’re a second-hand dealer and you’ve purchased GST-free commodities, you can use this scheme to levy GST charges and account for it.

How is GST Charged Based on the Gross Margin Scheme?

According to this scheme, GST will be accounted for on the basis of gross margin versus the complete worth of the supplied goods.

Gross Margin = Sale Price (GST included) - Purchase Price

GST = Gross Margin x 7/107

Let’s take a look at an example

Assume, you’re part of a business which sells used jewellery. Let’s say you purchased jewellry from a person who has not registered for GST at S$1,200 and then sold that jewellery to a customer of yours for S$1,800.

As per the Gross Margin Scheme, the calculations will be done as follows:

GST = (S$1,800 - S$1,200) x 7/107 = S$39.25

For the purpose of reporting GST:

Worth of supply (standard-rated): S$1,760.75 (that is S$1,800 - S$39.25)
Output tax due: S$39.25

What happens when the SP (selling price) is ? PP (purchase price)?

In the event of SP being less than/equal to PP, the gross margin will be considered as nil & accounting for GST will not be applicable.

Nevertheless, the sale price has to be mentioned in Box 1 (complete value of supplies which are standard-rated) of the return you’re going to file for GST.

Conditions You Need to Comply With to Use This Scheme

  • You’re part of a business which sells used commodities
  • Example: Dealers in jewellery/electrical appliances/furniture/second-hand motor vehicles who belong to a business which sells used commodities.
    You must not exercise this scheme when you intend to sell your used goods occasionally or as a one-off instance. For example, when you plan to dispose off your business assets.

  • The used commodities you purchased were GST-free.
  • This is inclusive of commodities that are bought from:
    • A supplier who has not registered for GST or
    • A supplier who is GST-registered and who had exercised the Gross Margin Scheme (that is, you’ve not received any tax invoice & you have not made any input tax claim).

How to Apply for This Scheme

In order to check if you qualify for this scheme, you will need to use the “Goods and Services Tax Self-review of Eligibility and Declaration on Use of Gross Margin Scheme (GMS)” form via the IRAS website.

Once you’ve checked each and every condition & obligation that is mentioned in the form and feel that those conditions can be met by you, you’ll need to present to IRAS your original form.

In case you had received an approval to utilise this scheme earlier, you’ll continue to stay under this scheme. You’re not liable to submit any form to the Inland Revenue Authority of Singapore.

You can exercise the scheme starting from the declaration date. A further approval from the IRAS side is not required.

There is another option via which you can levy GST charges on a second-hand motor vehicle which is known as the Discounted Sale Price Scheme.

Other Schemes Available

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