DEBIT CREDIT NOTE
Goods and Services Tax (GST) is levied on all goods imported into Singapore. It is calculated based on:
- Customs value of the goods, plus all duties, or
- Value of the last selling price plus all duties, if there has been more than one sale
GST on non dutiable goods is calculated on the customs value of last selling price. In the case of dutiable goods, GST will be calculated on the customs value plus the duties payable.
Tax invoices, receipts and credit notes are common documents issued when billing your customers. These documents serve as important records of business transactions between you and your customers.
GST is charged on all sales of goods and services made in Singapore, except for exported goods, international services and exempt supplies.
For GST to be chargeable on a supply of goods or services, the following four conditions must be satisfied:
- The supply must be made in Singapore;
- The supply is a taxable supply;
- The supply is made by a taxable person; and
- The supply is made in the course or furtherance of any business carried on by the taxable person
In some cases it will be necessary that a business might have to make some changes on the invoices that have already been issued. In these cases a debit and credit note will be issued for revising an invoice.
Taxable supply includes all supply of goods and services except those that have been specifically exempted under the GST Act. The main exempt items are the provision of financial services, the sale or lease of residential properties and the supply of investment precious metals. A taxable person refers to a GST-registered person or a person who is liable to register for GST. This means that GST is only charged on taxable supplies supplied by a GST-registered person or a person liable to register for GST. GST will be chargeable if the sale is carried on in the normal course of the business of the taxable person. However, if the supply is made by the taxable person in his personal capacity, GST is not chargeable on this personal transaction.
Types of Supply
Supplies for GST purposes can be broadly classified into
Non Taxable supplies
Taxable supply can further be classified into standard rated and zero rated supply.
Non-taxable supply can be classified into exempt supply and out-of-scope supply
In the case of Standard rated supply, GST is to be applied at 7% on the taxable supplies.
For Zero rated supply the GST is applied at 0%. There are two kinds of zero rated supplies, export of goods and provisions of international services
Exempt supplies are supplies that are exempt from GST. They include the provision of financial services, sale and lease of residential properties and the importation and local supply of investment precious metals (IPM). No GST needs to be charged on exempt supplies
Out-of-scope supplies refer to supplies which are outside the scope of the GST Act. They also include supplies where the place of supply is outside of GST: General Guide For Businesses 9 Singapore
A tax invoice is the main document for supporting an input tax claim. A tax invoice must be issued when your customer is GST registered. Your customer needs to keep this tax invoice as a supporting document to claim input tax on his standard-rated purchases. In general, a tax invoice should be issued within 30 days from the time of supply.
Simplified Tax Invoice
Simplified tax Invoice is issued when the total taxable amount is less than $1000.
Credit note is issued to correct a genuine mistake or to give a credit to the customer.
The following are the situations when a credit note is issued;
- To correct a genuine mistake
- Goods or services were not supplied
- Charges are partly or fully waived off
- Goods or services are accepted but the terms of the contract are not fully met
- Goods are returned
- Goods and services were supplied and discount was given subsequently.
The following is the information required on a credit note;
- A unique serial number
- Date of issue
- Name address and GST number
- Customer’s name and address
- Reason for credit
- A description of the goods
- Quantity and amount credited
- The rate and amount of tax credited
- The total amount credited excluding tax.
- The total amount credited including tax.
It has to be satisfied by the Comptroller of GST that the GST has been accounted by the dealer on the original supply. Adjustments should be made to the value of standard-rated supplies and output tax in the GST return for the accounting period in which the credit note is issued.
You can choose not to adjust the credit amount charged in the original invoice if all the following conditions are satisfied;
- It has been agreed with your customer that the GST amount will not be adjusted
- The agreement may be in writing or through emails or letter correspondences with your customer.
- Both the customer and you should hold a copy of the written agreement as part of your GST records .
- The customer is a fully taxable person
- The credit note, which is issued without any tax credit, should contain the statement “This is not a credit note for GST purposes”.
For such credit notes, both you and your customer need not adjust the value of your taxable supplies/taxable purchases and corresponding output tax/input tax.
Usually it is required to issue a tax invoice or simplified tax invoice for standard rated supplies. This is required to serve as a supporting document while claiming input tax claims. You may issue a debit note to request for payment for transactions where no GST is charged.
A supplier of goods or services or both is mandatorily required to issue a tax invoice. However, during the course of trade or commerce, after the invoice has been issued there could be situations like, The supplier has erroneously declared a value which is less than the actual value of the goods or services or both provided. The supplier has erroneously declared a lower tax rate than what is applicable for the kind of the goods or services or both supplied. The quantity received by the recipient is more than what has been declared in the tax invoice. Any other similar reasons. In order to regularize these kinds of situations the supplier is allowed to issue what is called as debit note to the recipient.
Debit note can be issued in the following cases
- There has been a supply of goods and/or services.
- Tax invoice has been issued for the supply.
- Taxable value and/or tax charged in the tax invoice is less than the taxable value or tax payable for the supply.
- Tax liability is required to be adjusted.
The following information needs to be maintained in a debit note,
- name, address and Goods and Services Tax Identification Number of the supplier;
- nature of the document;
- a consecutive serial number
- date of issue
- name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient
- name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered
- serial number and date of the corresponding tax invoice or, as the case may be, bill of supply
- value of taxable supply of goods or services, rate of tax and the amount of the tax debited to the recipient
The records of the debit note or a supplementary invoice have to be retained until the expiry of seventy two months from the due date of furnishing of annual return for the year pertaining to such accounts and records
Debit Credit note can be issued when any adjustments need to be made to existing invoices. Adjustment can only be made once and the debit and credit notes must not be used simultaneously as accounting documents.