Changes in GST Act due to Budget 2018 introduces the concept of Reversal Charge Regime and Reversal Charge (RC) Business.
RC Business is a person who is subject to reverse charge.
If you are a GST-registered person who procures services from overseas suppliers, you are an RC Business when:
(a) You are not entitled to full input tax credit; or
(b) You belong to a GST group that is not entitled to full input tax credit.
Full input tax credit test
You would not be entitled to full input tax credit, if you fall under either of the following circumstances:
(a) You carry out non-business activities (i.e. provide free or subsidised services) ; or
(b) You fail the De Minimis Rule under regulation 28 of the GST (General) Regulations at the end of any prescribed accounting period, except if:
(1) You make only exempt supplies listed in regulation 33 of the GST (General) Regulations (“regulation 33 exempt supplies”) and the nature of your business is not one of those listed in regulation 34 of the GST (General) Regulations (“regulation 34 business”); or
(2) Any provision in the GST legislation grants you the right to claim your input tax in full.
The De Minimis Rule is satisfied if the total value of all exempt supplies made does not exceed:
(a) an average of S$40,000 a month; and
(b) 5% of the total value of all taxable and exempt supplies made in that period.
If you are a non-GST registered person who procures services from overseas suppliers, you would be liable for GST registration by virtue of the reverse charge rules if you satisfy the following conditions:
(a) Your imported services which are within the scope of reverse charge exceed S$1 million in a 12-month period (under either the retrospective or prospective basis); and
(b) You would not be entitled to full input tax credit if you were GST registered.
If a non-GST registered person becomes registered or liable for registration by virtue of the reverse charge rules, he must comply with the responsibilities and obligations of a GST-registered person.