Supply of Goods vs. Supply of Services

For GST purposes you are making a supply of goods when you:

  1. manufacture your own goods for sale; or
  2. process and treat your customers' original goods such that new or different goods are produced as a result (i.e. there is a change in the character or nature of the original goods).

When there is no change in the character or nature of the original goods after the process and treatment, then you are making a supply of services for GST purposes.

Local Company A manufactures and sells chocolates to Company B. Local Company A is making a supply of goods (chocolates) to Company B.

Local Company A is engaged by Company B to provide assembly services. Company B delivers its semi-finished components to Company A, which would then assemble these semi-finished components into finished products according to specifications provided by Company B.

Even though Company A only provides assembly services to Company B, Company A is regarded as making a supply of goods for GST purposes as there is a change in the nature of Company B's original goods such that new goods in the form of finished products are produced.

Company C purchases 100 second-hand washing machines for export to its customers in Indonesia. Before exporting the washing machines, Company C delivers them to local Company D for repairs.

The repair service performed by Company D does not change the nature or form of the original goods (washing machine).

Rather, the repair services merely restore the washing machines to their original condition. Hence, Company D is providing a supply of services to Company C.

GST for Supply of Goods

Local Supplies

For goods supplied locally, you are required to charge GST.

Exports

For goods that are exported, you may zero-rate (i.e. charge GST at 0%) the supply if you maintain the required documents stated in GST: Guide on Exports (776KB) or GST: Guide on Hand-Carried Exports Scheme (560KB).

Out-of-Scope Supply

For goods that are delivered directly from a place outside Singapore to another place outside Singapore, the supply is outside the scope of GST (i.e. out-of-scope supply).

No GST needs to be charged for such supplies and you do not need to declare them in your GST return.

However, you are required to maintain supporting documents (e.g. bill of lading, air waybill) to demonstrate that the supply is an out-of-scope supply.

GST for Supply of Services

You need to charge GST on the services you provide to your customer unless it can qualify as an international service under section 21(3) of the GST Act.

For the list on international services, please refer to Providing International Services.

Supply of Tools/Machines Used in Manufacturing

Besides the supply of manufactured goods, you may also supply tools or machines that are used in the manufacturing process separately from the finished goods.

Where you supply tools or machines to your customer that you retain to subsequently manufacture finished goods in Singapore, you are making a local supply of the tool or machine and hence must charge GST accordingly.

Company F engages Company Y to supply wafers. To protect its intellectual property, Company F separately engages Company Y to first supply the mask that Company Y will use to manufacture the wafers.

As the mask will be retained by Company Y in Singapore to produce the wafers, Company Y must charge Company F GST on the supply of the mask.

However if you supply certain tools or machines to an overseas person, you may zero-rate the supply provided you satisfy the prescribed conditions.

For more information, please refer to GST: Zero-rating of Tools or Machine Used in Manufacturing Goods for Export to Overseas Customers (192KB).

Importing Goods Belonging to Overseas or Local Persons

Claiming GST as a Section 33(2) or Section 33A Agent

You may claim import GST (or alternatively, use your import GST suspension/deferment scheme privileges such as MES) incurred on goods belonging to non GST-registered overseas persons if you import the goods in the capacity of a section 33(2) or section 33A GST agent for that overseas person.

Claiming GST as a Section 33B Agent

From 1 Jan 2015, you may also claim the full GST incurred (or use your import GST suspension/deferment privileges) on the re-importation of goods which you previously sent abroad for value-added activities, belonging to your local customers or GST-registered overseas customers if the requirements under section 33B are satisfied.

You should not under any circumstance, claim import GST or use your import GST suspension privileges to import goods belonging to local persons unless it is permitted under a GST scheme granted to you or a specific GST provision (such as section 33B as explained above).

For more information on claiming import GST under section 33(2) and 33A, please refer to GST: Guide on Imports (382KB).

For more information on claiming import GST under section 33B, please refer to Claiming of GST on re-import of value-added goods (349KB).

Payments for Lost, Stolen or Damaged Goods

You may have to pay your customer for any goods that are lost, stolen or damaged while the goods are in your custody, for instance when your customer consigns his goods to you for the purposes of performing value-added activities.

When the payment is punitive in nature and not for something which the customer has done in return, there is no supply and no GST should be charged.

However, if your customer supplies goods or services in return for the payment you have made, the payment will be subject to GST.

For more information, please refer to Compensation to/from customer.

Company E misplaced goods belonging to a customer which were consigned to it for testing.

Based on the agreement between Company E and the customer, Company E is required to compensate the customer based on the cost of the goods lost.

For GST purposes, there is no supply made by the customer to Company E in return for the compensation received.

Company E damaged goods belonging to a customer which were consigned to it for testing.

Based on the agreement between Company E and the customer, Company E is required to repair the goods.

However as Company E lacks the expertise to perform the repair, the customer undertakes the repair and charges Company E for its services.

For GST purposes, there is a supply of repair services made by the customer to Company E.

Termination of Contract/Agreement

You have a contract with your customer to supply a pre-determined number of component parts during the next five years.

Three years into the contract, your customer decides that it no longer wants to purchase the parts from you. In settlement, your customer has to pay you $50,000.

When the early termination of the contract is made under the terms of the existing contract, the payment is outside the scope of GST.

However, where there is no termination clause in the original contract and separate agreements have to be entered into to terminate the original contract, the termination payment is treated as payment for a supply of services. Hence GST is chargeable on the payment you receive.

Research Grant

When you receive research grants to conduct certain research and development projects, and you do not give anything in return to the donor, you are not making a supply to the donor. Such gratuitous grants given are not subject to GST.

For example, if you only provide the donor with access to research information for the sole purpose of monitoring the research progress and the primary purpose of the grant is to give funding incentive, the grant will not be treated as consideration for a supply and consequently GST is not chargeable.

However, you are treated as making a supply on grants that you receive if you provide benefits to the donor, for instance the donor receives rights over the fruits of the project (e.g. intellectual property rights from any invention).

For details, please refer to Receiving Grant.

Warranty Repairs

As part of the warranty service which you provide to your customer, you may perform repair works or provide replacement parts without extra charges.

You do not need to account for GST on the repair work or the replacement parts if the price of your original supply of the goods has already included the charge for the warranty service.

The warranty repairs may also be performed by your distributor or your authorised agent.

For more information, please refer to Warranty Repairs (32KB).

  • Do I have to charge GST when I give samples to my customers?

    Industrial samples and commercial samples will not be subject to GST if they are in a form which is not ordinarily available for sale to the public and are given to your actual or potential customers.

    These samples must be easily distinguished from the actual products that are available for sale in the market. They should be marked with words such as "Not for sale" or "Sample only".

  • I import raw-materials which will be used for manufacturing goods in Singapore. The semi-finished goods are then sent to my overseas sub-contractor in Malaysia for further processing. The finished goods are imported into Singapore again before I sell them to my local or overseas customers. What are the tax implications?

    GST is payable when you import the raw materials into Singapore.

    When you send the semi-finished goods to Malaysia for further processing, the movement of these goods is treated as your export and should be reported as your zero-rated supplies.

    When the finished goods are subsequently brought into Singapore, GST is payable on the import value of the finished goods because they are treated as new imports.

    The GST you paid on the importation of raw materials and finished goods can be claimed as your input tax, subject to the conditions for claiming input tax .

    If you are under the Major Exporter Scheme, the import GST payable is suspended.

    Subsequently, when the goods are sold locally, you should charge GST on the supply of goods.

    For goods that are exported, you may zero-rate the supply if you maintain the required documents stated in GST: Guide on Exports (776KB) or GST: Guide on Hand-Carried Exports Scheme (560KB).

  • I have sold some goods to Malaysia. As part of my after-sales service, I temporarily import the goods into Singapore for repair. Subsequently, these goods will be re-exported back to Malaysia. Do I have to pay GST on the importation of these goods?

    You may apply for Import Relief with the Singapore Customs. GST will be temporarily suspended at the point of importation, subject to conditions.

    For more information, please visit Singapore Customs' website or contact Singapore Customs on (+65) 6355 2000.

  • Do I have to pay GST on the importation of trade samples?

    If you are under the Major Exporter Scheme, you need not pay GST on your imports of goods.

    Alternatively, you may apply for Import Relief with Singapore Customs if the total value does not exceed $400. GST will be temporarily suspended at the point of importation, subject to conditions.

    For more information, please visit Singapore Customs' website or contact Singapore Customs on (+65) 6355 2000.

  • I bought goods produced from an overseas manufacturer which are under warranty. The goods became defective during the warranty period and replacements were delivered to me. The defective goods were thereafter sent to a local agent of the overseas manufacturer as scrap or destroyed. Do I need to charge GST when I pass the defective goods to the local agent?

    As the exchange of a replacement good for a faulty one is part of the original contract for the sale of goods, there is no supply when the defective goods are returned to the local agent of the overseas manufacturer.

    Therefore, you do not need to charge GST when you pass the defective goods to the local office.

  • I leased a machine from an overseas company for 3 years, after which I will return (export) the machine to the overseas company. If I import the machine into Singapore, can I claim the import GST?

    You can claim the import GST on the machine if you are using the machine to make taxable supplies.

    In order to support the claim for input tax, you must hold a GST payment permit for the importation of the machine showing yourself as the importer of the machine, in addition to the commercial invoice and shipping documents.

  • I export my defective goods from Singapore to Batam for repair and then re-import the repaired goods into Singapore. Since there is no sale or purchase of goods, do I need to report the export and re-import in my GST returns? Can I claim import GST on the re-import?

    Although the export is not as a result of your sale, you need to report the movement of your goods. Therefore, you should report the value of the exports of defective goods in Box 2 (Total value of zero-rated supplies) of your GST return.

    When you re-import the repaired goods, you can claim the import GST if the goods are for the making of taxable supplies.

    For goods re-imported within three months, you can apply for Import Relief with Singapore Customs. For more information, please visit Singapore Customs' website or contact Singapore Customs on (+65) 6355 2000.

    You need to report the value of import in Box 5 (Total value of taxable purchases) of your GST return. If applicable, the import GST should be reported in Box 7 (Input tax and refund claimed).

  • I sell goods to my customers in Thailand and instruct my overseas supplier in Indonesia to ship the goods directly to Thailand. Do I have to charge GST?

    As the goods are delivered from a place outside Singapore (Indonesia) to another place outside Singapore (Thailand), it is treated as an out-of-scope supply. You do not need to charge GST.
  • My local customer instructs me to deliver the goods to his customer in Thailand. Therefore, I instruct my overseas supplier in Indonesia to ship the goods directly to Thailand. Do I have to charge GST to my local customer?

    As the goods are delivered from a place outside Singapore (Indonesia) to another place outside Singapore (Thailand), it is treated as an out-of-scope supply. You do not need to charge GST to your local customer.

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