Under the Discounted Sale Price Scheme, you can charge GST on 50% of the selling price when you sell a second-hand/ used vehicle. You do not need to seek prior approval from IRAS to use the scheme.
Example:
You sold a motor vehicle at $25,000 (excluding GST). GST is chargeable at 50% of the selling price.
GST = $25,000 x 50% x 7% = $875
For GST reporting purposes:
Value of standard-rated supply: $25,000
Output tax due: $ 875
Example:
You sold a motor vehicle at $25,875 (inclusive of GST). GST is chargeable at 50% of the selling price (excluding GST).
GST = $25,875 x 7/207 = $875
For GST reporting purposes:
Value of standard-rated supply: $25,000 (i.e. $25,875 - $875)
Output tax due: $ 875
When to use Discounted Sale Price Scheme
Non second-hand motor vehicle dealer
You should use the Discounted Sale Price Scheme when you occasionally sell a vehicle that you use in your business.
Second-hand motor vehicle dealer
You may use the Discounted Sale Price Scheme in the following situations:
- You have previously claimed GST on the purchase of the vehicle. In such situation, you cannot use the Gross Margin Scheme.
- Your customer is GST-registered. In such situation, selling under the Discounted Sale Price Scheme will enable your customer to claim the GST incurred if it is a commercial vehicle (subject to conditions for claiming input tax).
Another method to charge GST on second-hand motor vehicles is the Gross Margin Scheme. It is applicable to second-hand motor vehicles that were purchased free of GST (e.g. purchased from non-GST registered person or under the Gross Margin Scheme). For more information, please refer to Gross Margin Scheme.
FAQs
Yes, you are required to charge GST on the sale of your company vehicle even though you did not claim GST on the purchase of the vehicle. You should use the Discounted Sale Price Scheme and GST is charged on 50% of the selling price of the used vehicle.
You should reflect the full selling price on your tax invoice and state how the GST is computed (e.g. 7% GST @ Selling Price X 50%).