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.

You manufacture and sell chocolates to your customer. You are making a supply of goods (chocolates) to your customer.

You are engaged by your customer to provide assembly services. Your customer delivers his semi-finished components to you to assemble into finished products according to his specifications.

Even though you only provide assembly services, you are regarded as making a supply of goods for GST purposes as there is a change in the nature of the original goods such that new goods in the form of finished products are produced.

You perform repair services on second-hand washing machines sent to you by your customer. The repair service performed by you do 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, you are making a supply of services to  your customer.

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(938KB) or GST: Guide on Hand-Carried Exports Scheme(725KB).

You sold goods to a local customer and were instructed to deliver the goods to the customer's freight forwarder for export. At the time of supply, you are certain that all the goods will be exported. To zero-rate the supply to the local customer, you need to maintain the following transport document within 60 days from the time of supply to substantiate your exports:

For export via air or sea

Air waybill / bill of lading showing details of your goods exported and bearing your name as the exporter. Alternatively, the freight forwarder can issue a subsidiary export certificate or note of shipment to you.

For export via land

Export permit showing your name as the exporter and the vehicle number.

The transport document is in addition to other necessary transaction documents that you should maintain, such as purchase order, customer's written instruction to deliver the goods to his freight forwarder, payment evidence etc.

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.

You deal in the manufacture and repair of electrical equipment and provide repair services to your customers. An overseas customer sends a faulty equipment to you for repair and has requested for the equipment to be delivered to a local customer thereafter.

Under section 21(3)(g) of the GST Act, services supplied directly in connection with goods can only be zero-rated if supplied to an overseas person and if the goods are for export at the time the services are performed. As the equipment is delivered locally in Singapore, the repair services performed by you do not qualify for zero-rating as an international service. Hence, you must charge GST on the supply.

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.

You are engaged by a local company to supply wafers. To protect their intellectual property, the company has separately engaged you to first supply the mask that you will be using to manufacture the wafers.

As the mask will be retained by you in Singapore to produce the wafers, you must charge 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 (174KB).

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 (423KB).

For more information on claiming import GST under section 33B, please refer to Claiming of GST on re-import of value-added goods (441KB).

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.

You misplaced goods belonging to a customer which were consigned to you for testing.

Based on the agreement between you and the customer, you are 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 you in return for the compensation received.

You damaged goods belonging to a customer which were consigned to you for testing.

Based on the agreement between you and the customer, you are required to repair the goods.

However, as you lack the expertise to perform the repair, the customer undertakes the repair and charges you for his services.

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

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).

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