Purpose
The Cash Accounting Scheme, which is available to small businesses whose annual sales do not exceed S$1 million, offers the following benefits.
- Eases Cashflow
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.
- Eases Compliance
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.
Qualifying for the Scheme
To apply for the scheme, you must satisfy the following conditions:
- You are registered for GST under voluntary basis;
- You do not expect the value of your taxable supplies to exceed S$1 million for the 12 months after using the scheme;
The value of taxable supplies refers to the total of your standard-rated supplies and zero-rated supplies. However, the following that have been reported as your standard-rated supplies are to be excluded:
- You have no GST returns unfiled or tax unpaid; and
- In the three years before the date of your application, you have not:
- Been convicted of an offence nor accepted an offer of composition under the GST Act or the Customs Act;
- Been assessed to a penalty under Section 48 of the GST Act; and
- Had the Cash Accounting Scheme withdrawn from you.
Applying for the Scheme
To apply, submit a letter to the Comptroller of GST with the following details. Generally, unless we require additional information and documents, you will be informed of the outcome of your application within one month from the date of submission of your letter.
- A description of your taxable supplies;
- The expected value of your taxable supplies in the next 12 months; and
- 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.
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.
To continue on the scheme after the three years, you must submit a new application at least 3 months before your approval expires.
In some cases, IRAS may not grant approval on the grounds of revenue protection.
Accounting for and Reporting GST
While under the scheme, the net GST in each accounting period will be:
- the total amount of GST on the payments you receive from your customers,
minus - the total amount of GST you pay on your business purchases.
The date when payment is received or made for the common payment modes used by the businesses are:
| Mode | Date of payment received | Date of payment made |
|---|
| Cash | Date you receive the cash from your customer | Date your supplier receives the cash from you |
| Cheque | Date you present the cheque to the bank (i.e. the bank-in date). For a cheque that is dishonored, payment is treated as received on the date which you present the new cheque to the bank | Date of the cheque, or the date you present the cheque to your supplier, whichever is later |
| Nets facility/credit card etc. | Date these establishments transfer the money to you | Date you make payment using the facility |
| Giro/telegraphic transfer | Date your bank receives the money | Date your bank deducts the money |
The scheme does not apply to any supply of goods or services made under any hire purchase agreement, conditional sale agreement or credit sale arrangement. This means that for these transactions, you must account for output tax based on the time of supply rules.
Other Obligations and Responsibilites
Accounting for output tax upon expiry of scheme
You may continue to account for output tax on the supplies made while you were under the scheme upon receipt of payment from your customers. If you opt to do so, you will correspondingly only claim input tax on purchases received while under the scheme upon making payment to your suppliers.
However, you must account for output tax on taxable supplies made after the date of expiry of your approval based on the
time of supply rules.
You were on the Cash Accounting Scheme from 1 Jan 2016 to 31 Dec 2018 and had made the following sales and purchases from 29 Dec 2018 to 1 Mar 2019. You file quarterly GST returns covering the accounting periods ending Mar, Jun, Sept and Dec.
Transactions while under the scheme
| Transaction | Invoice date | Invoice number | Payment date | When to account for GST |
|---|
| Sales | 29 Dec 2018 | 00001 | 15 Jan 2019 | You may account for the output tax in your GST return for the period ended 31 Mar 2019, upon receipt of payment from your customer. |
| Purchases | 27 Dec 2018 | 12345 | 31 Jan 2019 | As you will account for output tax upon receipt of payment from your customer, you will claim input tax in your GST return for the period ended 31 Mar 2019 upon payment made to your supplier. |
Transactions after expiry of the scheme
| Transaction | Invoice date | Invoice number | Payment date | When to account for GST |
|---|
| Sales | 15 Feb 2019 | 00002 | 1 Apr 2019 | You will account for output tax based on time of supply rules. In this case, as the tax invoice was issued first, the output tax will be accounted for in your GST return for the period ended 31 Mar 2019. |
| Purchases | 1 Mar 2019 | 54321 | 15 Apr 2019 | You will claim input tax based on date of your supplier's tax invoice, although you have not made payment. As the tax invoice is dated 1 Mar 2019, you will claim the input tax in your GST return for the period ended 31 Mar 2019. |
Accounting for output tax upon deregistration from GST or Cessation of Business
You will account for and pay the outstanding output tax on all your taxable supplies made in the 12 months preceding your deregistration from GST in your Final GST Return (GST F8).
If you cease business (but have yet to cancel your GST registration), you will account for and pay the outstanding output tax on all your taxable supplies made in the 12 months preceding your cessation of business in your next GST return to be submitted.