GST FOR CAR DEALERS AND AUTO TRADE

GST-Car Dealers

GST FOR CAR DEALERS  AND AUTO TRADE

GST is a broad-based consumption tax levied on the import of goods as well as nearly all supplies of goods and services in Singapore. You are required to apply for GST registration within 30 days from the date your liability to register arises. If you fail to apply for GST registration within the required time, you may be liable to a fine up to $10,000 and a penalty equal to 10% of the tax due in respect of each year starting from the date on which you are required to apply for GST registration. You are not allowed to charge GST on your sales transactions before your GST registration is approved. Once your application is approved, you would receive a Letter of Notification indicating your GST Registration number, the effective date of GST registration and other important information. You can only start charging GST from the effective date of GST registration

All goods and services are taxable and known as taxable supplies. Any business whose annual turnover exceeds or is likely to exceed $1 million must be registered with GST. Businesses that do not exceed $1mil in turnover may register for GST voluntarily.

The business of a motor vehicle trader Includes the importing of motor vehicles, sale of new and used cars.All motor vehicles must be registered with LTA.LTA imposes regulatory charges on the sale of new vehicles. Regulatory charges do not attract GST as they do not relate to the provision of goods and services.

The GST treatment for the sale of new vehicles differs from the sale of a second hand vehicle. The sales of new and used motor vehicles are taxable supplies for GST purposes.

IMPORTS-GST-Car Dealers

In the case of Imports, GST is payable on the CIF plus custom duty. Import GST will not be imposed in the following cases and if the conditions are met;

No Scenarios Conditions
1 Motor Vehicle temporarily exported for repair The Vehicles are reimported after 3 months, should be registered with the Customs officer and a certificate of repair is produced
2 Motor Vehicle temporarily imported for repair The Vehicles are reexported after 3 months, should be registered with the Customs officer and a certificate of repair is produced
3 Spareparts imported for repair The Vehicles are reexported after 3 months, should be registered with the Customs officer and the vehicles are identified to the satisfaction of the custom officer
4 Motor vehicles for demonstration The vehicles are not used on the road or not sold or transferred to any person in Singapore
5 Motor Vehicles for Display An export import document is furnished by the Director – General of Customs, the vehicles must be re-exported within 3 months and if the vehicles are sold in Singapore, GST will be payable on the CIF plus the custom duty

 Sale of New Vehicles

For sale of new vehicles, GST is charged on the Selling Price less the regulatory charges. The following are the scenarios

No Scenarios Conditions
1 Sale of vehicle to another motor vehicle trader Vehicle price will be inclusive of the regulatory charges & excluding GST
2 Sale of new vehicle to public Vehicle price will be inclusive of the regulatory charges & including GST
3 Rebate granted by LTA Only the net regualtory charges (i.e excluding the rebate) will be included
4 Discounts on COE For GST purpose the Total COE value is considered and the not the discounted value
5 Upon Scrapping a vehicle less than 10years old PARF/COE rebate is applicable

 Sale of New Vehicles under Hire-Purchase

In the case of a hire purchase, two separate supplies occur. The vehicle is supplied to the finance company and the company in turn sells it to the customer at the same price.GST is to be accounted on the selling price of the vehicle excluding the regulatory charges.If a trade discount is offered the same has to be deducted from the selling price and the net amount is to be shown in the tax invoice.

Sale of Second-Hand Vehicles

For GST purpose, the vehicles previously registered overseas are excluded as the owner would have to pay a lot of regulatory charges. There are two options for calculation of GST under the sale of second hand vehicles , the Gross margin Scheme and The Discounted Sale Price Scheme.

GST-Car Dealers – Gross Margin Scheme for Sale of Second-Hand Vehicles

Here the Goods and Services Tax , is accounted on the difference between the selling price and the purchase price of the motor vehicle.

For eg : Selling price –  45000, purchase price 30000, the GST will be calculated on (45000-30000 = 15000), GST =  15000 x 7/107

Conditions applicable

  1. The vehicle was purchased from an individual or a non registered GST business.
  2. The vehicle was bought from another GST registered motor vehicle trader who has used the Gross Margin Scheme.
  3. A tax invoice cannot be issued in a Gross Margin Scheme, only a normal invoice can be issued.
  4. If you sell a second-hand vehicle at a loss, no GST is to be accounted for
  5. You cannot offset the loss of one sales transaction against the gross margin on another sales transaction.

GST-Car Dealers – Discounted Sale Price Scheme for Sale of Second-Hand Vehicles

Here GST is charged at 50% of the selling price of the vehicle without considering if the vehicle was sold at a profit or loss.

Conditions

  1. You have previously claimed GST
  2. The customer is registered for GST
  3. A tax invoice must be issued

When a vehicle is dismantled into various parts and sold, Gross Margin Scheme cannot be applied, GST is to be charged on the full selling price.

When you sell a temporary COE to another motor vehicle trader, GST will be applicable on the profit.

When deposit is collected as  a part payment of the price of the vehicle, GST is applicable on the deposit collected.

Trade-in

Trade in refers to a scenario where two situations arise

  1. You sell the new vehicle to the customer
  2. The customer sells his old vehicle to you.

GST will be applicable on the selling price excluding the regulatory charges, the net trade in value of the old vehicle cannot be set off against the selling price of the new vehicle.

De-Registration

Once you are de-registered from GST registration, a final GST return (GST F8) will be issued to you to file and account for GST up till the last day of the GST registration.

Record Keeping

Proper records need to be maintained. It is to be ensured that all the GST declarations are supported by documents.

The documents to be maintained are;

1.Receipts, vouchers and invoices and other relevant documents to prove a transaction

2.Accounting records

3.Bank Statements

4.Anyother record of transaction connected to the business

Record Keeping for Sale of Second-Hand Vehicles

For sale of second hand vehicles, certain documents need to be maintained.

1.The purchase/sales tax invoices

2.Stock book with the following details

Purchase details

  • stock book number
  • date of purchase
  • purchase invoice number
  • name of seller
  • vehicle registration, engine and chassis numbers
  • make and model 

Sales details

  • date of sale
  • sales invoice number
  • name of purchaser 

 Accounting details

  • purchase price and GST incurred (if applicable)
  • selling price and GST charged (if applicable)
  • method of disposal (Gross Margin or Discounted Sale Price Scheme)
  • margin on sale (if applicable) o GST rate on date of sale
  • GST amount accounted as output tax 

When a vehicle is purchased, the purchase invoice should contain the following; 

  • seller’s name and address
  • your name and address
  • invoice number
  • date of transaction
  • stock book number
  • particulars of vehicle (registration, engine and chassis numbers, make and model)
  • total purchase price 

The seller must sign the invoice, confirming that he has purchased the vehicle at the specified price 

The stock book should contain the purchase details alongwith the price. The price is the amount that has been agreed upon by the buyer and seller and the same should not be altered. 

When a sale is done under Gross Margin Scheme, a sales invoice is issued with the following details;

  • your name, address and GST registration number
  • buyer’s name and address
  • invoice number
  • invoice date
  • stock book number
  • particulars of vehicle (registration, engine and chassis numbers, make and model)
  • total price
  • signature of issuer
  • the statement ‘This vehicle is sold under GST Gross Margin Scheme. Both the seller and buyer cannot claim any input tax on the vehicle.’ 

When the sale is done under the Discounted Sale Price Scheme, a tax invoice is issued with the following details; 

  • the words ‘tax invoice’ in a prominent place
  • invoice number
  • invoice date
  • your name, address and GST registration number
  • buyer’s name and address
  • stock book number
  • particulars of vehicle (registration, engine and chassis numbers, make and model)
  • type of supply (e.g. outright sale or hire purchase)
  • cash discount offered, if any
  • amount payable, excluding GST
  • GST rate and GST amount
  • total amount payable, including GST 

The customer must sign the invoice, stating that he is the buyer of the vehicle at the specified price 

The sale details and selling price should be entered in the stock book

A copy of the sales/tax invoice is to be maintained 

CONCLUSION

GST can be claimed on the purchase of a motor vehicle if it is not disallowed under the GST law. If you are not a motor vehicle dealer the Discounted Sale Price Scheme should be adopted when a vehicle is sold that has been used in the business.

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