When it comes to the Goods and Services Tax (GST) in Singapore, most people are familiar with the standard rate supply where a GST is charged by GST-registered businesses on all taxable goods and services sold in the country. However, there is another type of GST known as the "Deemed Supply" that often goes unnoticed.
A deemed supply occurs when goods are permanently disposed of, transferred, or used for non-business purposes, such as giving free gifts to customers or providing complimentary food and beverages to employees. Even though no consideration is received for these supplies, they are still considered taxable for GST purposes. This is because if these supplies were not deemed taxable, the recipient would enjoy the goods tax-free while the business would have claimed input tax on their purchase. To address this, the GST Act considers such supplies as "deemed supplies."
To determine the tax liability arising from deemed supplies, the concept of open market value (OMV) comes into play. The OMV is used to evaluate whether it is necessary to declare output tax on these supplies within the framework of the GST Act.
While the standard rate supply is more commonly known and discussed, it is important for businesses to also be aware of the implications and requirements related to deemed supplies under the GST regime. Understanding and complying with the rules surrounding deemed supplies ensures that businesses fulfill their GST obligations and avoid any potential penalties or issues related to incorrect reporting.
By the way, do you know what is the difference between "Zero Rate Supply" and "Exempt Supply"? When should you declare the "Out-of-Scope Supply"?
