There are two types of supplies that are exempted from GST - the provision of financial services and the sale and lease of residential properties. No GST needs to be charged or paid for exempt supplies.
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Financial services
Sale and lease of residential properties
Can I claim GST incurred in the making of exempt supplies?
Reporting your exempt supplies
Financial services
The Fourth Schedule to the GST Act provides the list of financial services that are exempted from GST. Examples of these financial services include:
- Provision of loans;
- Issue / sale of shares or bonds;
- Provision of life policy by an insurance company;
- Charges by banks for the operation of bank accounts;
- Exchange of currency;
- Provision of futures or forward contracts.
For more information and the full list of exempted financial services, please refer to the list of financial services (79KB).
Provision of financial services by non-financial institutions
The provision of financial services is not confined to financial institutions. The following are common types of financial services provided:
- Deposit of money in a bank
This is considered as a loan provided by the businesses to the bank (i.e. provision of financial service). The interest income received from the bank should be reported as your exempt supplies in Box 3 of the GST return.
- Exchange gain/loss arising from transacting in foreign currencies
You may sell goods to your customers and invoice them in a foreign currency (e.g. US dollars). When your customers make payment in foreign currency and you exchange the foreign currency for Singapore Dollars, exchange gains or losses may arise. You should report the absolute value (i.e. drop negative sign, if any) of net realised exchange gain/loss for each prescribed accounting period as your exempt supply in Box 3 of your GST return.
Example:
Your prescribed accounting period is from Oct to Dec 2009.
| |
Realised exchange gain/(loss) |
| Oct 2009 |
($150) |
| Nov 2009 |
$100 |
| Dec 2009 |
($200) |
Net realised foreign exchange loss for the period = ($250)
Absolute value of net realised foreign exchange loss for the period = $250
In addition, you received $400 interest from fixed deposit in December 2009.
Total value of exempt supplies (Box 3) = $250 + $400 = $650
Fees from arranging or advising on financial transactions
The advising on, arranging, broking, or underwriting of financial activities is not exempted from GST. Such fees are subject to GST when the services are provided to local customers. These fees may be zero-rated when they are provided to overseas customers.
Example:
You are an insurance broker who receives a commission from an insurance company for arranging a life policy for a local policyholder. You need to charge GST at 7% for this service that you provide to the insurance company. This is so even though the premium of the life policy is exempted from GST.
Sale and Lease of residential properties
The sale and lease of residential properties are exempted from GST.
Residential properties refer to:
- A vacant land that is zoned "Residential" or "Rural Centre and Settlement" in the Master Plan which will be used for residential development; or
- Residential dwellings (e.g. flats, semi-detached houses) and properties which provide medium to long term accommodation as alternatives to residential dwellings (e.g. serviced apartments)
Sale of furnished residential properties
You need to charge GST on the supply of movable furniture and fittings. However, fixtures such as built-in cabinets and wardrobes, kitchen and sanitary wares, wall-mounted air conditioners that are attached permanently to the residential property can be exempted from GST together with the property. Please refer to FAQs for information on how to account GST on the sale and lease of furniture and fittings.
Fees from services relating to sale/ lease of residential properties transactions
Exemption from GST is not extended to the arranging, broking or advisory services relating to the sale/ lease of residential properties. Such fees are subject to GST.
Example:
You are a real estate/property agent and providesservices either in your individual capacity (as a GST registered person) or as an employee of a GST-registered real estate agency. In both instances, the services provided are taxable supplies. This is regardless of whether the properties are residential or commercial in nature.
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Can I claim GST incurred in the making of exempt supplies?
When you make both taxable and exempt supplies, you are required to apply the De Minimis Rule to determine the amount of input tax you can claim.
If you satisfy the De Minimis Rule, you may treat all your input tax as if they are incurred for the making of taxable supplies and claim the input tax in full. If the De Minimis rule is not satisfied, you can only recover the input tax that is attributable to your taxable supplies. Find out more on how to apply the De Minimis Rule.
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Reporting your exempt supplies
Exempt supplies have to be reported in Box 3 (Total value of exempt supplies) of your GST return. Find out more on value of exempt supplies to be reported in How Do I Prepare My GST Return (520KB).
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FAQs
Like standard-rated supplies, supplies that are zero-rated are part of the taxable supplies. The only difference is that GST of 0% is applicable to zero-rated supplies, while GST of 7% is applicable to standard-rated supplies. Like standard-rates supplies, input tax incurred in the making of zero-rated supplies is claimable.
GST is not chargeable on exempt supplies. Input tax incurred in the making of exempt supplies is not claimable. This is unlike input tax incurred for making zero-rated and standard-rated supplies which is claimable.
If it is administratively cumbersome for you to separately track, we are prepared to allow you to report total value of realised and unrealised gains or losses. This is subject to the following conditions:
a) Your accounting practices conform to proper accounting and reporting standards.
b) You adopt same basis of reporting value of exempt supplies from foreign currency and derivative transactions consistently.
However, you should also be aware that reporting unrealised gain or losses may affect your input tax claims when applying the De Minimis Rule. Thus, you are advised to weigh the reduction in tracking efforts against the impact on input tax claims.
Yes. If you provide financial services to overseas persons, the financial services will qualify for zero-rating as international services. You may apply for GST registration voluntarily. The approval of the application is at the discretion of the Comptroller.
Generally, interest income received is an exempt supply under the Fourth Schedule to the GST Act.
However, financial services that can qualify as international services under section 21(3) of the GST Act will be treated as zero-rated supplies instead of exempt supplies e.g. interest income from overseas bank.
If the shop-house is approved for both residential and commercial uses, you need to apportion the rental accordingly. The rental attributable to the residential portion is an exempt supply. No GST needs to be charged. The rental attributable to the non-residential portion will attract GST.
The rental of the bare residential unit is exempt from GST. However, you need to charge GST on the rental of the furniture and fittings.
To compute the rental value of the bare residential unit, the annual value (as shown in the Valuation List and Valuation Notice) of the property should be used. The monthly rental value of the bare unit shall be taken as 1/12 of the annual value of the property.
The monthly rental value of the furniture and fittings will be the difference between the monthly gross rent (i.e. the total rental which you charged your tenant) and 1/12 of the annual value of the property. If the actual gross rental is lower than 1/12 of the annual value of the property, you do not need to charge GST on the rental of furniture and fittings.
A numeric example:
Total rental of the furnished flat = $4,500 per month
Annual value in the Valuation List = $36,000
Value of exempt supply (per month) = 1/12 x $36,000 = $3,000 per month
Value of supply of furniture and fittings (per month) = $4,500 - $3,000 = $1,500 per month
You will have to charge GST on $1,500. This is the rental value of your furniture and fittings for the purpose of GST charging. This is regardless of whether a different amount for rental of furniture and fittings was stated in your tenancy contract.
Alternatively, if you wish to treat the rental as inclusive of GST, you can account for the GST based on the tax fraction of 7/107 of $1,500.
The sale of the bare residential property is not subject to GST as it is an exempt supply. However, you need to charge GST on the supply of any movable furniture and fittings.
Therefore, you need to apportion the selling price of your furnished residential property into:
1) Value of furniture and fittings based on its open market value or cost (subject to GST)
2) Value of the bare property (not subject to GST)
Although you are not a financial institution, your deposit of money in a bank is a provision of financial service. Hence, you are required to report the interest received as your exempt supply.
Your provision of loan is a provision of financial service. However, since it qualifies as an international service, you may report the interest received as your zero-rated supply instead.
However, if your company had provided the loan to a local company, you should report the interest received as your exempt supply.