Under the Gross Margin Scheme, GST is accounted for on the gross margin instead of full value of the goods supplied.
Gross Margin = Selling Price (inclusive of GST) – Purchase Price
GST = Gross Margin x 7/107
You are in the business of selling second-hand cars. You bought a car from a non-GST registered person at $1,000 and sold the car to your customer for $1,500. If you are under the Gross Margin Scheme:
GST = ($1,500 - $1,000) x 7/107 = $32.71
For GST reporting purposes
Value of standard-rated supply: $1,467.29 (i.e. $1,500 - $32.71)
Output tax due: $ 32.71
If the selling price is lower than or equal to the purchase price, the gross margin is treated as nil and no GST has to be accounted for. However, the selling price is to be reported in Box 1 (Total value of standard-rated supplies) of the GST return.
Conditions for using Gross Margin Scheme
- You are in the business of selling used goods (e.g. second-hand motor vehicles, electrical appliances, furniture, jewellery). You should not use the scheme if you make once-off or occasional sale of used goods such as disposal of business assets.
- The used goods were purchased free of GST. This includes goods purchased from:
- Non-GST registered supplier (e.g. an individual)
- GST-registered supplier who had used the Gross Margin Scheme (and you have not been issued a tax invoice and have not claimed any input tax).
Applying for the scheme
If you wish to use the Gross Margin Scheme, please review your eligibility by downloading the Self-Review of Eligibility and Declaration on Use of Gross Margin Scheme (GMS) (192KB).
After verifying that all conditions and obligations as stated in the form can be satisfied, please submit the original form to IRAS. You can begin to use the Gross Margin Scheme from the date of declaration. No further approval is required from IRAS.
If you had previously obtained approval to use the scheme, you can continue to use it. You do not need to submit the form to IRAS.
No. You cannot issue a tax invoice for sales made under the Gross Margin Scheme. You can only issue a normal sales invoice which must have the following details.
- your name, address and GST registration number
- buyer’s name and address
- invoice number
- invoice date
- stock book number
- description of goods including unique identification number
- total price
- your signature
- the statement ‘Goods are sold under GST Gross Margin Scheme. Both the seller and buyer cannot claim any input tax on the goods.’
Please note that the GST chargeable is not to be shown on the invoice.
No. For the first sales transaction, no GST has to be accounted for. For the second sales transaction, you have to account for GST on the gross margin of the goods. You cannot offset the loss in the first sales transaction against the gross margin on second sales transaction for the purpose of determining the total GST to be accounted for.
No, you cannot claim any input tax on the purchase.