Singapore Releases Updated e-Tax Guide on GST and Attribution of Input Tax

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The Inland Revenue Authority of Singapore (IRAS) has recently released an updated version of its e-Tax Guide on Goods and Services Tax (GST) and the Attribution of Input Tax.

The new guide, which is intended for businesses that are GST-registered and make both taxable and exempt supplies, explains how a partially exempt business should attribute its input tax and also clarifies when input tax may be considered to be “directly attributable” to a supply.

GST is a value added consumption tax payable by all parties in the production chain, but refunded to all except the final consumer. GST is a much broader tax than a sales and service tax; it operates on a negative concept, and all goods and services are therefore subject to GST unless specifically exempted.

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The IRAS outlines input tax in the following two definitions:

  • A tax on supplies of goods or services made to a business, as a GST registered business; or
  • A tax paid or payable by a business on the importation of goods into Singapore where the goods or services are used or to be used by the business for the purpose of its business

The new guide explains that input tax is claimable if it is directly attributable to the making of taxable supplies. Therefore, if a business makes both taxable and exempt supplies, it would not be allowed to claim input tax attributable to the exempt supplies made unless the De Minimis Rule is satisfied.

According to the De Minimis Rule, a partially exempt business may claim all its input tax incurred, including input tax incurred in the making of exempt supplies, if the total value of all exempt supplies made is less than or equal to:

  • An average of US$40,000 a month; and
  • Five percent of the total value of all taxable and exempt supplies made in that period.

If the De Minimis Rule is not satisfied, the partially exempt business must claim their input tax as follows:

  • Input tax directly attributable to the making of taxable supplies will be claimable
  • Input tax directly attributable to exempt supplies is not claimable unless the exempt supplies fall within the list in Regulation 33 and that conditions in Regulation 35 can be satisfied (both regulations are outlined in the guide)
  • Residual input tax to be apportioned by an apportionment formula
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In order to establish whether or not input tax incurred on a purchase of a good or service is “directly attributable” to a supply, the business should determine the following:

  • If the purchase forms a cost component of a supply; or
  • If the purchase is being used as an input or will be used to make a supply.

The guide also clarifies how a business can determine if their input tax is residual in nature. The tax will be classified this way if it meets one of the following criteria:

  • It is directly attributable to both taxable and exempt supplies
  • It is incurred for your overall running of your business

The full text of the updated guide can be viewed here.


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