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Motor Trade

You must charge GST on the selling price of the motor vehicle less regulatory fees (e.g. COE). For sale of second-hand vehicles, you may use the Gross Margin Scheme (subject to the fulfillment of certain conditions) or the Discounted Sale Price Scheme to account for the GST.
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Sale of New Vehicle

You should charge GST on the selling price less Additional Registration Fee (ARF), Certificate of Entitlement (COE), Registration Fee (RF) and road tax.

ARF, COE, RF and road tax do not attract GST as they are regulatory charges imposed by Land Transport Authority (LTA) on vehicle buyers.

Example 1: Sale Price Excluding GST

You sell a vehicle to your customer for $50,000 (inclusive of ARF, COE, RF, Road Tax but excluding GST).

ARF

$14,000

COE

$13,000

RF

$ 140

Road Tax

$ 500

GST

= (Vehicle Price - ARF - COE - RF - Road Tax) x 7%

= ($50,000 - $14,000 - $13,000 - $140 - $500) x 7%

= $22,360 x 7%

= $1,565.20

For GST reporting purposes

Value of standard-rated supply: $22,360

Output tax due: $1,565.20

Example 2: Sale Price Including GST

You sell a vehicle to your customer for $51,565 (inclusive of ARF, COE, RF, Road Tax and GST).

ARF

$14,000

COE

$13,000

RF

$ 140

Road Tax

$ 500

GST

= (Vehicle Price - ARF - COE - RF - Road Tax) x 7/107

= ($51,565 - $14,000 - $13,000 - $140 - $500) x 7/107

= $23,925 x 7/107

= $1,565.19

For GST reporting purposes

Value of standard-rated supply: $22,359 (i.e. $23,925- $1,565.19, cents to be dropped off for reporting purpose)

Output tax due: $1,565.19

For more information, please refer to GST: Guide for Motor Vehicle Traders (PDF, 971KB).

To compute the GST chargeable, use GST Computation Template for Sale of New Vehicles (XLS, 41KB).

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Sale of Second-hand vehicle

When you are selling a second-hand motor vehicle, there are two methods to charge GST. They are the Gross Margin Scheme and Discounted Sale Price Scheme.

Gross Margin Scheme

You may use the Gross Margin Scheme if:

  1. You are in the business of selling used vehicles; and
  2. The used vehicles were purchased free of GST (e.g. vehicles purchased from non-GST registered person or GST-registered supplier who had used the Gross Margin Scheme).

Discounted Sale Price Scheme

You may use the Discounted Sale Price Scheme in the following situations:

  1. You have previously claimed GST on the purchase of the vehicle. In such a situation, you cannot use the Gross Margin Scheme.
  2. Your customer is GST-registered. In such a situation, selling under the Discounted Sale Price Scheme will enable your customer to claim the GST incurred if it is a commercial vehicle (subject to conditions for claiming input tax).

For more information, please refer to GST: Guide for Motor Vehicle Traders (PDF, 971KB).

To compute the GST chargeable, use GST Computation Template for Sale of Used Vehicles (XLS, 28KB).

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Gross Margin Scheme (GMS)

Under the Gross Margin Scheme, GST is accounted for on the gross margin instead of full value of the goods supplied.

Gross Margin = A – B

where A is the consideration received for goods sold, i.e. the selling price.
           B is the consideration paid for goods purchased, i.e. the purchase price.

If A (selling price) is lower than or equal to B (purchase price), the gross margin is treated as nil and GST is not chargeable. However, the selling price is to be reported in Box 1 (Total value of standard-rated supplies) of the GST return.

If A (selling price) is greater than B (purchase price), then GST (i.e. output tax) is accountable by you on the gross margin based on the tax fraction i.e. Gross Margin x 7/107.

For more information, please visit our webpage on Gross Margin Scheme.

Example 3: Gross Margin Scheme

You are in the business of selling second-hand cars. You bought a car from a non-GST registered person at $1,000 and sold the car to your customer for $1,500.

Based on the Gross Margin Scheme:

GST = ($1,500 - $1,000) x 7/107 = $32.71

For GST reporting purposes

Value of standard-rated supply: $1,467 (i.e. $1,500 - $32.71, cents to be dropped off for reporting purpose)

Output tax due: $32.71

Points to consider Updated!

Before you apply for GMS, you should consider the following factors:

  1. You will have added responsibilities to ensure that all conditions for applying GMS are satisfied and able to fulfil all obligations as stated in the self-review and declaration form.
  2. You will have to maintain records and accounts for all used goods sold under GMS (66 KB)
  3. You will have to ensure that GST is correctly accounted on the gross margin of used goods sold by you
  4. The incorrect use of GMS will make you liable to penalties under the GST legislation.

Applying for the Scheme Updated!

Complete and submit the Self-review of Eligibility and Declaration on Use of Gross Margin Scheme Form after verifying that all conditions in the Form are satisfied.

You can begin to use the Gross Margin Scheme from the date of submission of the Form. No further approval is required from IRAS.

If you have previously received IRAS’ approval to use the scheme, you can continue to do so as long as you still satisfy the conditions in the Form. You do not need to submit the Form again.

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Discounted Sale Price Scheme

Under the Discounted Sale Price Scheme, you can charge GST on 50% of the selling price when you sell a second-hand / used vehicle. You do not need to seek prior approval from IRAS to use the scheme.

Example 4: Sale Price Excluding GST

You sold a motor vehicle at $25,000 (excluding GST)

GST chargeable = $25,000 x 50% x 7% = $875

For GST reporting purposes

Value of standard-rated supply: $25,000

Output tax due: $875

Example 5: Sale Price Including GST

You sold a motor vehicle at $25,875 (inclusive of GST)

GST chargeable = $25,875 x 7/207 = $875

For GST reporting purposes

Value of standard-rated supply: $25,000 (i.e. $25,875 - $875)

Output tax due: $875

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Sale of Vehicle Body

Please refer to GST: Guide for Motor Vehicle Traders (PDF, 971KB) for more details.

To compute the GST chargeable, use GST Computation Template for Sale of Vehicle Bodies (XLS, 25KB).

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  • I am selling a second-hand vehicle using Discounted Sale Price Scheme. Should I reflect the full selling price or 50% of the selling price on the tax invoice?

    You should reflect the full selling price on your tax invoice and state how the GST is computed (e.g. 7% GST @ Selling Price x 50%).

  • I bought a motor vehicle from a GST-registered supplier who had used the Gross Margin Scheme. Can I claim input tax on the purchase?

    No, you cannot claim any input tax on the purchase.

  • If I sell second-hand vehicles using the Gross Margin Scheme, can I issue a tax invoice to my customers?

    No. You cannot issue a tax invoice for sales made under the Gross Margin Scheme. You can only issue a normal sales invoice which must have the following details:

    1. Your name, address and GST registration number;
    2. Your customer's name and address;
    3. Invoice number;
    4. Invoice date;
    5. Stock book number;
    6. Particulars of vehicle (registration, engine and chassis numbers, make and model);
    7. Total price;
    8. Your signature; and
    9. The statement 'This vehicle is sold under GST Gross Margin Scheme. Both the seller and buyer cannot claim any input tax on the vehicle.'

    Please note that the GST chargeable is not to be shown on the invoice.

  • I make 2 sales transactions using the Gross Margin Scheme. For the first transaction, there is a loss (i.e. selling price is lower than purchase price). Can I use the loss to offset the gross margin on the second transaction for the purpose of determining the total GST to be accounted for?

    No. For the first sales transaction, no GST has to be accounted for. For the second sales transaction, you have to account for GST on the gross margin of the goods.

    You cannot offset the loss in the first sales transaction against the gross margin on second sales transaction for the purpose of determining the total GST to be accounted for.

  • How do I charge and account for GST when I sell/scrap dismantled vehicle parts? Can I use the Gross Margin Scheme?

    When you dismantle a vehicle into various parts and sell/scrap the dismantled vehicle parts, you need to charge and account for GST on the full selling price of the vehicle parts.

    You cannot use the Gross Margin Scheme for sale of vehicle parts.

  • As part of my sales promotion, I offer free accessories (e.g. tyres, seat covers) to my customer. Do I have to account for GST on these free gifts?

    No. As the cost of the 'free gifts' would have already been included in the selling price of the vehicle sold, you need not account for GST again on the free gifts.