GST Input Tax

Goods & Services Tax (GST) was a consumption tax introduced in 2015 to replace the sales tax and service tax before it. GST has its merits, but eventually it was abolished and repealed in 2018. Now it remains as a shadow lurking over the country as the people keep on guessing if GST will be reintroduced ever again. The facts, after all, point towards GST as a better tax collection system than Sales & Services Tax (SST), at the cost of more administrative work needed.

Therefore, to prepare you, who is possibly a merchant from being adversely affected by GST, this article aims to educate you on how to claim your input tax (GST suffered by a registered person) just in case GST is ever reinstated. We will start with the basics and proceed with the other concepts of input tax claiming. There is a follow-up article for mixed suppliers, so if you believe you will be making exempt & taxable supply simultaneously whenever GST is reintroduced, be sure to check that one out too.

Claiming Input Tax

Let’s start with the most basic facts, which is that you must be registered to claim input tax at all. If the business/a sole proprietor is not registered, then no input tax is claimable. To perform the claim, the business only needs to include the input tax claim (& supporting tax invoice evidence) in their GST return.

Now that you know how to do it, let’s go over the input tax limits that were present in 2018. Although it’s all historical, the concepts of these limits are similarly adopted in other countries that have GST (or Value Added Tax (VAT)), therefore it is expected to not change drastically.

Time of supply

Time of supply is a way to determine the exact date of a supply. For input tax purposes, this will determine which taxable period is input tax claimable on. Input tax on supply of goods is claimable at the earliest of:

1. goods received/taken off shelf,

2. invoice received, or

3. *payment made.

For services received, input tax is due at the earliest of:

invoice received, or *payment made.

*Special note for payment: Part payments that are earlier than goods received/taken off shelf or invoice received (for example a deposit made before invoice or goods are received), should have their input tax claimed separately. This means that when the full amount is claimed in the future, input tax relating to the part payment must be excluded.

Accruals adjustments