As at 31 December 2020, Augustine was contemplating the business of producing surgical masks as a sole proprietorship. He wanted to answer the government’s call to strengthen Singapore’s supply chain of surgical masks in the country’s battle against COVID-19.

Augustine intended to adopt a financial year-end that is the same as the calendar year-end. He envisaged the following transactions with local GST-registered businesses, unless otherwise stated, in the financial year from 1 January 2021 to 31 December 2021:

Transaction 1: Borrow $700,000, at the interest rate of 2.0% per annum for a tenure of five years, from the Oversea-Chinese Banking Corporation in Singapore as startup capital;

Transaction 2: Inject another $300,000, to be funded from Augustine’s savings accumulated over the years and CPF monies borrowed from Augustine’s parents, as additional startup capital;

Transaction 3: Sign a two-year tenancy agreement, at the rental rate of $6,000 per month, for a commercial unit of sufficient space to house machines for production of surgical masks in Changi North Industrial Park;

Transaction 4: Purchase two highly customised machines with free on-site warranty of five years, at the cost of $400,000 each, for the rapid production of surgical masks;

Transaction 5: Import raw materials, at the cost of RM900,000 (the relevant exchange rate is $1:RM3 and $1:RM$2.80 per the Straits Times and his part-time accountant respectively);

Transaction 6: Purchase additional raw materials, at the cost of $500,000, as part of Augustine’s efforts to diversify sources of raw materials and prevent disruptions to production;

Transaction 7: Return 20% of additional raw materials to be purchased in Transaction 6 due to spoilage during transportation from the supplier’s warehouse to Augustine’s factory;

Transaction 8: Purchase packaging materials (including plastic packaging and selfadhesive labels), at the cost of $3,900, from a local non-GST registered business;

Transaction 9: Pay wages and salaries of $68,000 to two production workers to be employed on a contractual basis for one year, which may be renewed for another year depending on business performance;

Transaction 10: Pay wages and salaries of $28,000, which is $2,000 above market rate, to Augustine’s parents who will help out with general administration, including packaging and delivery;

Transaction 11: Sell surgical masks to distributors and retailers, which will bring in total proceeds of $500,000 (inclusive of GST, where applicable) for the financial year ending 31 December 2021;

Transaction 12: Receive sales return from distributors and retailers estimated at 10% of total proceeds for the financial year ending 31 December 2021 to be derived in Transaction 11;

Transaction 13: Export surgical masks to overseas distributors and retailers, which will bring in total proceeds of $200,000 (inclusive of GST, where applicable) for the financial year ending 31 December 2021;

Transaction 14: Sell surgical masks directly to end consumers, either online or offline, which will bring in total revenue of $120,000 for the financial year ending 31 December 2021;

Transaction 15: Customise surgical masks for corporate customers with the printing of corporate logo, which will bring in total revenue of $25,000 for the financial year ending 31 December 2021;

Transaction 16: Charge interests, to be computed based on 1% of total revenue for the financial year ending 31 December 2021 to be derived in Transaction 15, for settlement of outstanding payments after credit period;

Transaction 17: Pay annual corporate secretarial fees of $500, which include service fees for the registering of business name with the Accounting and Corporate Regulatory Authority and the filing of tax returns; and

Transaction 18: Pay the corporate secretary: (a) late filing fees of $150 to be imposed by the tax authority; and (b) out-of-pocket expenses to be computed based on 10% of annual corporate secretarial fees in Transaction 17.

For your information, Augustine was trained as an accountant. He was registered with the Singapore Chartered Tax Professionals as an Accredited Tax Practitioner (GST). Augustine had the experience of managing a business, which was GST registered.

Required: 

(a) For each transaction above, apply the concepts and principles of GST, indicate the type of supply, determine the value of supply and compute the amount of output GST chargeable or input GST claimable, as the case may be, should the sole proprietorship be registered for GST purposes by Augustine. Thereafter, compute the projected net GST payable to or refundable from the Inland Revenue Authority of Singapore (“IRAS”) for the financial year ending 31 December 2021. Show all workings in your answer by adopting the table format below. Round all figures to be presented to the nearest two decimal places. (55 marks)

Transaction Number Type of Supply Value of Supply ($) Output GST Chargeable ($) Input GST claimable ($) [X] [X] [X] [X] [X] [X] [X] [X] [X] [X] [X] [X] [X] [X] [X] Sub-total [X] [X]

Transaction Number	Type of Supply	Value of Supply ($)	Output GST Chargeable ($)	Input GST claimable ($)
[X]	[X]	[X]	[X]	[X]
[X]	[X]	[X]	[X]	[X]
[X]	[X]	[X]	[X]	[X]
Subtotal			[X]	[X]

(b) Determine whether Augustine should register his sole proprietorship with the IRAS for GST purposes. Substantiate your discussions with the relevant computation(s) in Question 2(a), where applicable. Limit your discussions to two pages. (20 marks)

Answer rating: 100% (QA)

Supply is the amount of a resource that firms or producers are willing and able to deliver to the market or to an individual There are different types of supply namely a Nontaxable supply This is a su... View the full answer