SINGAPORE: On August 8, 2016, the Inland Revenue Authority of Singapore released a third update to its goods and services tax (GST) guide on the partial exemption rules and input tax recovery rules.
The guide discusses the rules that apply to businesses that make taxable and exempt supplies. The general input tax recovery rule is that input tax is claimable only if it is attributable to the making of taxable supplies. In general, input tax attributable to the making of exempt supplies is not claimable. However, to alleviate business costs, the partial exemption rules allow taxpayers to claim some input tax incurred in the making of exempt supplies – more than would otherwise be allowed under the general input tax recovery rule.
Further, there are situations where taxpayers are allowed to claim all their input tax, including input tax attributable to the making of exempt supplies, at the end of any prescribed accounting period, namely if: the De Minimis Rule under regulation 28 is satisfied; or only regulation 33 exempt supplies are made and the taxpayer is not a regulation 34 business. The guide explains these rules in depth.
If the De Minimis Rule is not satisfied in any prescribed accounting period, a taxpayer can claim only input tax incurred in the making of taxable supplies. In cases where input tax cannot be directly identified as incurred in the making of either taxable or exempt supplies, the input tax is residual in nature (residual input tax) and has to be apportioned. This is known as “input tax apportionment.”
