Claiming Input Tax for Purchase
The cost and running expenses of a motor car (except for Q-plated cars with COE issued before 1 Apr 1998) are disallowed expenses under Regulation 27 of the GST (General) Regulations. Hence, the GST incurred on the purchase and running expenses (e.g. petrol and parking expenses) of a motor car is not claimable.
Other motor vehicles
For other motor vehicles (e.g. lorry, van and motorcycle) that do not fall under the definition of a 'motor car', the GST incurred for the purchase and running expenses of the motor vehicles are claimable, subject to the conditions for input tax claim.
Charging Output Tax for Sale
If you are not a motor vehicle dealer, you should use the Discounted Sale Price Scheme when you occasionally sell a vehicle that you have used in your business.
Under this scheme, you are required to charge GST on 50% of the selling price when you sell the used vehicle.
Example 1: Sale of Second-hand Motor Vehicle Excluding GST
You sold a motor vehicle at $25,000 (excluding GST).
GST chargeable = $25,000 x 7% x 50% = $875
Box 1 (Value of standard-rated supply): $25,000
Box 6 (Output tax due): $875
Example 2: Sale of Second-hand Motor Vehicle Including GST
You sold a motor vehicle at $25,875 (inclusive of GST).
GST chargeable = $25,875 x 7/207 = $875
Box 1 (Value of standard-rated supply): $25,000 (i.e. $25,875 - $875)
Box 6 (Output tax due): $875
I did not claim GST on my company vehicle as the input tax is disallowed. Do I need to charge GST on the sale of my company vehicle if I am not a motor car dealer?
Yes, you are required to charge GST on the sale of your company vehicle even though you did not claim GST on the purchase of the vehicle.
You should use the Discounted Sale Price Scheme and charge GST on 50% of the selling price of the used vehicle.
Can I claim input tax on the GST incurred on the purchase and running expenses of a commercial vehicle? How about the GST incurred on a private vehicle?
For GST purposes, whether the GST incurred on the purchase and running expenses of a vehicle is claimable depends on whether the vehicle falls within the definition of a “motor car”.
A “motor car” is defined as a motor car which is constructed or adapted for the carriage of not more than 7 passengers exclusive of the driver and the weight of which unladen does not exceed 3,000 kilograms but does not include —
(a) a motor car registered before 1st April 1998 as a business service passenger vehicle for the purposes of the Road Traffic Act (Cap. 276);
(b) a taxi;
(c) a motor car registered as a private car (school transport);
(d) an unused motor car which has not been previously registered under the Road Traffic Act supplied or imported for the purpose of being let on hire or sold;
(e) a motor car supplied to a financial institution for the purposes of making a supply of that motor car by the financial institution under a hire purchase contract;
(f) a motor car supplied to or imported by a taxable person for the purposes of being let on hire or sold by that taxable person who is a dealer of motor cars; and
(g) a motor car used for instructional purposes for reward and registered under paragraph 9(1) of the Second Schedule to the Road Traffic (Motor Vehicles, Registration and Licensing) Rules (R 5) by a person who holds a driving school licence issued under the Road Traffic Act.
If the vehicle falls within the definition of a “motor car”, the GST incurred is not claimable. Conversely, if the vehicle does not fall within the definition of a “motor car”, the GST incurred is claimable, subject to the conditions for input tax claim.