Generally, input tax incurred in the making of exempt supplies is not claimable unless the De Minimis Rule is satisfied. The De Minimis Rule allows GST-registered businesses to claim input tax on exempt supplies.
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De Minimis Rule
To satisfy the De Minimis Rule, the value of the exempt supplies has to be less than or equal to:
- Average of $40,000 per month; and
- 5% of the total value of all taxable* and exempt supplies made in that period.
*The value of relevant supplies received from your supplier that are subject to customer accounting, imported services and low-value goods that are subject to reverse charge and supplies of remote services and low-value goods made on behalf of underlying suppliers through your marketplace under the Overseas Vendor Registration regime should be reported as your taxable supplies. However, the value of such supplies should not be taken into account as taxable supplies for the purpose of the De Minimis Rule.
When De Minimis Rule is Satisfied
When the De Minimis Rule is satisfied, you may claim all input tax incurred, excluding disallowed input tax under regulations 26 and 27 of the GST (General) Regulations.
As the input tax claims are only provisionally allowed at the end of each prescribed accounting period, you are still required to perform a longer period adjustment by performing the same test in respect of the input tax claims you have made in the longer period.
For more information on De Minimis Rule, please refer to GST: Partial Exemption and Input Tax Recovery (PDF, 563KB).
When De Minimis Rule is Not Satisfied
When the De Minimis rule is not satisfied, you are not allowed to claim input tax directly attributable to the making of exempt supplies.
For input tax that cannot be identified as directly attributable to either taxable or exempt supplies (residual input tax), the amount that can be claimed is computed using the following apportionment formula:
1 The value of relevant supplies received from your supplier that are subject to customer accounting, imported services and low-value goods that are subject to reverse charge, and supplies of remote services and low-value goods made on behalf of underlying suppliers through your marketplace under the Overseas Vendor Registration regime should be excluded from the numerator and denominator of the apportionment formula.
For more information on determining if input tax incurred is directly attributable to a supply for input tax claiming purposes, please refer to GST: Guide on Attribution of Input Tax (PDF, 485KB).
Download the Partial Exemption Input Tax Recovery Calculator (XLS, 896KB)
and use it to compute your input tax claimable.
FAQs
I made the following supplies in my prescribed accounting period of 1 Apr 2014 to 30 Jun 2014. Can I claim all the input tax incurred in this period for the making of exempt supplies?
| Standard-rated supplies | Zero-rated supplies | Exempt supplies | Total supplies |
|---|---|---|---|
| $2,080,000 | $300,000 | $120,000 | $2,500,000 |
Applying the De Minimis Rule:
- Value of average exempt supplies per month = $120,000 ÷ 3 = $40,000.
- Percentage of exempt supplies over the total supplies = ($120,000 / $2,500,000) x 100% = 4.8%
Since the value of average exempt supplies is not more than $40,000 per month and 5% of the total value of supplies, the De Minimis Rule is satisfied and all input tax incurred for the making of exempt supplies are provisionally claimable.