The Cash Accounting Scheme is designed to alleviate the cash flow of small businesses. Under the scheme, businesses only have to account for output tax when payment is received.
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Purpose
The Cash Accounting Scheme, which is available to small businesses whose annual sales do not exceed S$1 million, offers the following benefits.
- Eases cashflow
Under the Cash Accounting Scheme, you account for output tax upon receipt of payment from your customers, thus easing your cashflow. When you claim your input tax, you do so only upon payment to your suppliers.
If you are not operating under the Cash Accounting Scheme, you must account for output tax based on the time of supply rules applicable to all GST-registered businesses.
In most cases, you must account for output tax at the earlier of (a) when an invoice is issued or (b) when payment is received.
This may result in you paying and accounting for output tax before receiving payment from your customers.
- Eases compliance
The scheme also has the benefit of easing compliance as businesses on the scheme only need to keep track of when they receive and make payment for their GST reporting.
Qualifying for the scheme
To apply for the scheme, you must satisfy the following conditions:
1. You are registered for GST under voluntary basis;
2. You do not expect the value of your taxable supplies to exceed S$1 million for the 12 months after using the scheme;
Value of taxable supplies
The value of taxable supplies refers to the total of your standard-rated supplies and zero-rated supplies. However, the following that have been reported as your standard-rated supplies are to be excluded:
- The value of relevant supplies received from your supplier that were subject to Customer Accounting. For more information, please refer to the e-Tax Guide "GST: Customer Accounting for Prescribed Goods" (PDF,575.4KB).
- The value of imported services which is subject to reverse charge. For more information, please refer to the e-Tax Guide "GST: Reverse Charge" (PDF, 971KB).
- The value of digital services supplied by an electronic marketplace operator on behalf of overseas suppliers via its marketplace under overseas vendor registration regime. From 1 Jan 2023, this will include both digital and non-digital services, i.e. remote services. For more information, please refer to the e-Tax Guide "GST: Taxing imported services by way of an overseas vendor registration regime" (PDF, 452KB).
- You have no GST returns unfiled or tax unpaid; and
- In the three years before the date of your application, you have not:
- Been convicted of an offence nor accepted an offer of composition under the GST Act or the Customs Act;
- Been assessed to a penalty under Section 48 of the GST Act; and
- Had the Cash Accounting Scheme withdrawn from you.
Applying for the scheme
To apply, please complete the application form via the following link.
Getting approval
We will approve your application if we are satisfied that, due to the nature, volume and value of your taxable supplies, as well as the nature of your accounting system, it is more appropriate for you to adopt this scheme.
Once your application is approved, we will inform you of the effective date from which you can start using the scheme. This effective date will be the beginning of the next prescribed accounting period following the approval.
Once approved, you are on the scheme for three years. You remain on the scheme for three years even if your taxable supplies exceed S$1 million per annum during the three years.
To continue on the scheme after the three years, you must submit a new application at least 3 months before your approval expires.
In some cases, we may not grant approval on the grounds of revenue protection.
Accounting for and reporting GST
While under the scheme, the net GST in each accounting period will be:
- the total amount of GST on the payments you receive from your customers,
minus - the total amount of GST you pay on your business purchases.
The date when payment is received or made for the common payment modes used by the businesses are:
| Mode | Date of payment received | Date of payment made |
|---|---|---|
| Cash | Date you receive the cash from your customer | Date your supplier receives the cash from you |
| Cheque | Date you present the cheque to the bank (i.e. the bank-in date). For a cheque that is dishonoured, payment is treated as received on the date which you present the new cheque to the bank | Date of the cheque, or the date you present the cheque to your supplier, whichever is later |
| Nets facility/credit card etc. | Date these establishments transfer the money to you | Date you make payment using the facility |
| Giro/telegraphic transfer | Date your bank receives the money | Date your bank deducts the money |
The scheme does not apply to any supply of goods or services made under any hire purchase agreement, conditional sale agreement or credit sale arrangement. This means that for these transactions, you must account for output tax based on the time of supply rules.
Other obligations and responsibilities
Accounting for output tax upon expiry of scheme
You may continue to account for output tax on the supplies made while you were under the scheme upon receipt of payment from your customers. If you opt to do so, you will correspondingly only claim input tax on purchases received while under the scheme upon making payment to your suppliers.
However, you must account for output tax on taxable supplies made after the date of expiry of your approval based on the time of supply rules.
Example
You were on the Cash Accounting Scheme from 1 Jan 2016 to 31 Dec 2018 and had made the following sales and purchases from 29 Dec 2018 to 1 Mar 2019. You file quarterly GST returns covering the accounting periods ending Mar, Jun, Sept and Dec.
Transactions while under the scheme
| Transaction | Invoice date | Invoice number | Payment date | When to account for GST |
|---|---|---|---|---|
| Sales | 29 Dec 2018 | 00001 | 15 Jan 2019 | You may account for the output tax in your GST return for the period ended 31 Mar 2019, upon receipt of payment from your customer. |
| Purchases | 27 Dec 2018 | 12345 | 31 Jan 2019 | As you will account for output tax upon receipt of payment from your customer, you will claim input tax in your GST return for the period ended 31 Mar 2019 upon payment made to your supplier. |
Transactions after expiry of the scheme
| Transaction | Invoice date | Invoice number | Payment date | When to account for GST |
|---|---|---|---|---|
| Sales | 15 Feb 2019 | 00002 | 1 Apr 2019 | You will account for output tax based on time of supply rules. In this case, as the tax invoice was issued first, the output tax will be accounted for in your GST return for the period ended 31 Mar 2019. |
| Purchases | 1 Mar 2019 | 54321 | 15 Apr 2019 | You will claim input tax based on date of your supplier's tax invoice, although you have not made payment. As the tax invoice is dated 1 Mar 2019, you will claim the input tax in your GST return for the period ended 31 Mar 2019. |
Accounting for output tax upon deregistration from GST or cessation of business
You will account for and pay the outstanding output tax on all your taxable supplies made in the 12 months preceding your deregistration from GST in your Final GST Return (GST F8).
If you cease business (but have yet to cancel your GST registration), you will account for and pay the outstanding output tax on all your taxable supplies made in the 12 months preceding your cessation of business in your next GST return to be submitted.
FAQs
My business has an annual turnover of above S$1 million. Can I be on the Cash Accounting Scheme?
No, the scheme is to assist small businesses whose annual sales do not exceed S$1 million.
What are the record keeping requirements for Cash Accounting Scheme?
In addition to the usual business and accounting records a GST registered person is required to maintain, you must also maintain records of your receipts from your customers and payments to your suppliers which can be easily traced to your sales and purchases.
If you receive or make cash payments, you must maintain receipted and dated tax invoices (i.e. the tax invoices should show clearly the amount you receive or pay and the date of payment). You are encouraged to issue and obtain receipts for
your cash sales and purchases.
When can I start to use the Cash Accounting Scheme?
Once your application is approved, we will inform you of the effective date from which you can start using the scheme. This effective date will be the beginning of the next prescribed accounting period following the approval.
What happens if the value of my taxable supplies exceeds S$1 million while using the scheme?
You can continue using the scheme until the expiry of the three-year period.
What happens if I transfer my business or part of my business as a going concern?
When you transfer your business or part of your business as a going concern to another person (i.e. the transferee) and:
- If the transferee is not registered and not liable to be registered for GST, you have to file a GST return within two months to account for and pay GST on supplies made and received during the previous 12 months which have not otherwise been accounted for;
- If the transferee is liable to be registered for GST, the transferee shall account for and pay tax as if the transferee was approved to use the scheme for supplies made and received by you prior to the date of transfer of the business.
If the transferee wishes to use the scheme for own supplies, the transferee has to separately apply for approval to use the scheme.
Can my approval be revoked?
Your approval may be revoked at any time if:
- you have been found to have provided false, misleading or inaccurate information in your application to use the scheme;
- you are convicted of a GST offence or have accepted an offer of composition relating to the GST by the Comptroller of GST or Singapore Customs while using the scheme;
- you are assessed to a Section 48 penalty under the GST Act while using the scheme;
- you have claimed input tax based on the normal time of supply rules even though you have not made any payment while using the scheme;
- you have failed to comply with any conditions or requirements imposed by the Comptroller of GST; or
- the Comptroller of GST considers it necessary to do so for the protection of revenue.
You will be informed in writing if your approval is revoked. Once your approval is revoked, you will account for and pay the outstanding output tax on your taxable supplies in your next GST return to be submitted. It does not matter that you have not received payment from your customers. You will account for output tax on taxable supplies made after the date of revocation of your approval based on the time of supply rules.
I purchase prescribed goods (i.e. mobile phones, memory cards and off-the-shelf software) that are subject to customer accounting. When do I account for the output tax (on behalf of my supplier) and claim the corresponding input tax (assuming I satisfy the input tax claiming conditions)?
You will account for the output tax and claim the input tax on the purchase in the accounting period in which you make payment to your supplier.