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Cash Accounting Scheme

The Cash Accounting Scheme is designed to alleviate the cash flow of small businesses. Under the scheme, businesses only have to account for output tax when payment is received.

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Purpose

The Cash Accounting Scheme, which is available to small businesses whose annual sales do not exceed S$1 million, offers the following benefits.

  1. Eases Cashflow

    2. Under the Cash Accounting Scheme, you account for output tax upon receipt of payment from your customers, thus easing your cashflow. When you claim your input tax, you do so only upon payment to your suppliers.

    If you are not operating under the Cash Accounting Scheme, you must account for output tax based on the time of supply rules applicable to all GST-registered businesses.

    In most cases, you must account for output tax at the earlier of (a) when an invoice is issued or (b) when payment is received.

    This may result in you paying and accounting for output tax before receiving payment from your customers.

  2. Eases Compliance

    3. The scheme also has the benefit of easing compliance as businesses on the scheme only need to keep track of when they receive and make payment for their GST reporting.

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Qualifying for the Scheme

To apply for the scheme, you must satisfy the following conditions:

  1. You are registered for GST under voluntary basis;
  2. You do not expect the value of your taxable supplies to exceed S$1 million for the 12 months after using the scheme;
  3. You have no GST returns unfiled or tax unpaid; and
  4. In the three years before the date of your application, you have not:
    1. Been convicted of an offence nor accepted an offer of composition under the GST Act or the Customs Act;
    2. Been assessed to a penalty under Section 48 of the GST Act; and
    3. Had the Cash Accounting Scheme withdrawn from you.
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Applying for the Scheme

To apply, submit a letter to the Comptroller of GST with the following details:

  1. A description of your taxable supplies;
  2. The expected value of your taxable supplies in the next 12 months; and
  3. The type of accounting system used, e.g. manual, customised accounting software or off-the-shelf accounting software. For off-the-shelf software, please state the name of software.
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Getting Approval

IRAS will approve your application if we are satisfied that due to the nature, volume and value of your taxable supplies and the nature of your accounting system, it is more appropriate for you to adopt this scheme.

Once your application is approved, you will be informed of the effective date from which you can start using the scheme. This effective date is usually the beginning of a prescribed accounting period.

Once approved, you are on the scheme for three years. You remain on the scheme for three years even if your taxable supplies exceed S$1 million per annum during the three years.

In some cases, IRAS may not grant approval on the grounds of revenue protection.

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  • My business has an annual turnover of above S$1 million. Can I be on the Cash Accounting Scheme?

    No, the scheme is to assist small businesses whose annual sales do not exceed S$1 million.

  • When can I start to use the Cash Accounting Scheme?

    Once your application is approved, you will be informed of the effective date from which you can start using the scheme. This effective date is usually the beginning of a prescribed accounting period.

  • How do I fill in my GST returns under the Cash Accounting Scheme?

    You should fill in the amounts based on payments received and made by you. The value of your supplies and value of your taxable purchases should exclude any supplies or purchases for which you have not received or made payment.

    The above does not apply to sales made by you under hire purchase, conditional sale and credit sale agreements.

  • What happens if I enter into hire purchase, conditional sale and credit sale agreements with my customers?

    The scheme does not apply to sales made under any hire purchase, conditional sale and credit sale agreements.

    You must account for GST based on the full value of the supply when you first issue an invoice to or receive the first payment from your customers, whichever is earlier.

  • What happens if the value of my taxable supplies exceeds S$1 million while using the scheme?

    You can continue using the scheme until the expiry of the three-year period.

  • What happens if I cease my business or deregister from GST?

    You have to file a GST return within two months to account for and pay GST on supplies made and received during the previous 12 months which have not otherwise been accounted for due to the use of the Cash Accounting Scheme.

  • What happens if I transfer my business or part of my business as a going concern?

    When you transfer your business or part of your business as a going concern to another person (i.e. the transferee) and:

    1. If the transferee is not registered and not liable to be registered for GST, you have to file a GST return within two months to account for and pay GST on supplies made and received during the previous 12 months which have not otherwise been accounted for;
    2. If the transferee is liable to be registered for GST, the transferee shall account for and pay tax as if he were approved to use the scheme for supplies made and received by you prior to the date of transfer of the business.

    If the transferee wishes to use the scheme for his own supplies, he has to separately apply for approval to use the scheme.

  • I purchase prescribed goods (i.e. mobile phones, memory cards and off-the-shelf software) that are subject to customer accounting. When do I account for the output tax (on behalf of my supplier) and claim the corresponding input tax (assuming I satisfy the input tax claiming conditions)?

    You will account for the output tax and claim the input tax on the purchase in the accounting period in which you make payment to your supplier.

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