GST: General Guide for Businesses (PDF, 728KB)
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Generally, GST-registered businesses are required to charge GST at the prevailing rate on the full value of goods sold.
The Gross Margin Scheme (GMS) is an optional scheme that allows eligible GST-registered businesses to account for GST on the gross margin*, instead of the full selling price, for certain goods. GMS does not apply to the provision of services and the sale of interest in or right over land.
*Gross Margin = Selling price - Purchase price
Who can use GMS
To check whether you are eligible to use GMS, you should:
- Use the Self-Review of Eligibility to Use the Gross Margin Scheme (GMS) checklist to self- assess your eligibility; and
- Refer to the eligibility conditions set out in paragraph 5.7 of e-Tax Guide, GST: General Guide for Businesses (PDF, 727KB).
Note: Before using the GMS, please complete the self-assessment checklist and ensure that you meet the eligibility conditions.
Penalties for incorrect use
You must meet all eligibility conditions before using GMS. If you use GMS incorrectly, you may be subject to penalties, and any under-accounted GST will be recovered.
How to calculate and report GST under GMS
When GST applies
| Situation | GST calculation | Reporting in GST return |
|---|---|---|
| Selling price is higher than purchase price | GST is calculated on the gross margin at Gross margin × 9/109 | Report selling price (excluding GST) in Box 1 of GST return |
| Selling price equals or is lower than purchase price | No GST payable | Report selling price in Box 1 of GST return |
You are in the business of selling second-hand cars. You buy a second-hand car from a non-GST registered person for $1,000. You sell it for $1,500.
Step 1: Calculate gross margin
Gross margin = $1,500 - $1,000 = $500
Step 2: Calculate GST amount payable
GST payable = $500 × 9/109 = $41.28
Step 3: Report in GST F5 return
For GST return reporting
- Box 1: Value of standard-rated supply: $1,458.72 (i.e. $1,500 - $41.28)
- Box 6: Output tax due: $41.28
What invoices you can issue
For GMS sales
You cannot issue tax invoices. You can only issue normal sales invoices that include:
- Your name, address and GST registration number
- Customer's name and address
- Invoice number and date
- Stock book number
- Description of goods with unique identification number (if available)
- Total price
- Your signature and customer's signature
- The statement: "Goods are sold under GST Gross Margin Scheme. Both the seller and buyer cannot claim any input tax on the goods."
Important: Do not show GST chargeable amount on the invoice.
For more information on list of records to maintain, please refer to Gross Margin scheme – Records and Accounts to be kept (PDF, 66KB).
Special situations
Multiple transactions with losses
You cannot offset losses from one transaction against profits from another transaction.
Example: If you make a loss on one sale and a profit on another sale, you must:
- Pay no GST on the loss-making sale; and
- Pay GST on the gross margin of the profitable sale
You cannot combine them to reduce your total GST.
Buying from GMS suppliers
If you buy goods from a supplier using GMS, you cannot claim input tax on that purchase, even if you are GST-registered.