GST Gross Margin Scheme (GMS)

GST Gross Margin Scheme (GMS)

The GST Gross Margin Scheme (GMS) is a strategic tax relief mechanism in Singapore designed for businesses dealing in second-hand goods. By allowing you to account for GST only on your profit margin rather than the full selling price, it prevents "tax on tax" and keeps your pricing competitive.

As of April 2026, with the GST rate at 9% and new InvoiceNow mandates rolling out, staying compliant is more critical than ever.

What is the GST Gross Margin Scheme?

Under standard GST rules, a registered business must charge 9% tax on the total value of a sale. However, for second-hand goods (like used cars, jewelry, or electronics), the item has already been taxed once when it was originally sold as new.

The Gross Margin Scheme allows you to charge GST only on the Gross Margin—the difference between what you paid for the item and what you sold it for.

The Golden Formula

The GST you owe to IRAS is calculated using the tax fraction:

GST Payable=(Selling Price−Purchase Price)×1099​

• If you sell at a loss: The margin is treated as 0. You pay no GST, but you cannot use this loss to offset gains on other sales.

Eligibility Criteria (2026 Update)

To use the GMS, you must meet specific conditions set by the Inland Revenue Authority of Singapore (IRAS). Note that as of recent 2025/2026 legislative updates, prior written approval from IRAS is no longer required, provided you meet the self-assessment criteria.

1. Nature of Goods: Must be "used goods" (e.g., pre-owned vehicles, second-hand furniture, electrical appliances).

   
   

2. Input Tax Condition: You must have purchased the goods without paying GST. This usually happens when you buy from:

   
   

   • Non-GST registered individuals (private parties).

   • A seller who also used the Gross Margin Scheme for the sale.

     
     

3. Excluded Items: The scheme cannot be used for the sale of new goods, services (like rentals), or land/property.

Compliance and Record Keeping

With the InvoiceNow initiative becoming mandatory for all new voluntary registrants from April 1, 2026, digital record-keeping is no longer optional.

Invoicing Requirements

When selling under the GMS, you must not issue a standard tax invoice. Instead, issue a sales invoice containing:

• Your name, address, and GST registration number.

  
  

• The statement: "Goods sold under GST Gross Margin Scheme. Both seller and buyer cannot claim input tax."

  
  

• Crucial: Do not show the GST amount separately on the invoice.

The GMS Stock Book

You are required to maintain a detailed stock book for every item, tracking:

• Date of purchase and purchase price.

  
  

• Unique identification numbers (e.g., Engine/Chassis number for cars).

  
  

• Date of sale and selling price.

  
  

• The calculated GST amount for each transaction.

Summary Table: Standard GST vs. Gross Margin Scheme

Feature	Standard GST	Gross Margin Scheme (GMS)
Taxable Base	Full Selling Price	Profit Margin (Sell - Buy)
GST Rate (2026)	9%	9/109 (Tax Fraction)
Input Tax Claim	Allowed for the buyer	Not Allowed for the buyer
Invoice Type	Tax Invoice	Sales Invoice (No GST shown)
Best For	New goods / B2B	Second-hand goods / B2C

Expert Insight: Why Use GMS in 2026?

The Gross Margin Scheme is a powerful tool. By reducing the tax burden on second-hand items, you can offer lower prices to your customers without sacrificing your take-home profit.

However, with IRAS's increased focus on digital transparency via the InvoiceNow network, ensure your accounting software is "GMS-ready." Incorrectly accounting for GST or failing to maintain a stock book can lead to heavy penalties and back-tax recovery.

Pro Tip: Always perform a "Self-Review Checklist" (available on the IRAS website) before applying the scheme to your transactions to ensure you meet every legal requirement for the 2026 tax year.

Are you unsure if your specific inventory qualifies for the Gross Margin Scheme, or do you need help setting up your GMS stock book for the 2026 tax season?

How Bestar Singapore can Help

Navigating the GST Gross Margin Scheme (GMS) in Singapore requires a blend of tax expertise and precise record-keeping. With the April 2026 mandate for InvoiceNow adoption for new voluntary registrants and the GST rate holding at 9%, the margin for error has never been thinner.

Bestar specializes in bridging the gap between complex IRAS regulations and your daily business operations. Here is how we help you maximize the benefits of the Gross Margin Scheme while staying fully compliant.

1. GMS Eligibility & Self-Assessment

Since July 2025, businesses no longer need prior written approval from IRAS to use the Gross Margin Scheme. However, this shift to self-assessment places the full burden of proof on the business.

How Bestar Helps:

• Technical Review: We conduct a comprehensive audit of your inventory to ensure your goods qualify as "used" under IRAS definitions.

  
  

• Input Tax Verification: We verify that your purchase sources (non-GST registered individuals or other GMS users) allow for the legal application of the scheme.

  
  

• Risk Mitigation: Our team performs the GMS Self-Review Checklist on your behalf to identify potential compliance gaps before they lead to IRAS audits.

2. Setting Up a Compliant GMS Stock Book

The most common reason for GMS-related penalties is poor record-keeping. IRAS requires a detailed Stock Book that tracks every item from purchase to final disposal.

How Bestar Helps:

• System Design: We help you implement digital stock book templates that capture mandatory fields: unique ID numbers (IMEI, Chassis, etc.), stock numbers, and purchase/selling dates.

  
  

• Accounting Integration: We ensure your GMS records flow seamlessly into your general ledger, making your quarterly GST F5 filings effortless.

  
  

• Audit Readiness: We maintain your records for the required five-year period, ensuring you are always ready for an IRAS query.

3. InvoiceNow & Digital Transformation (2026 Readiness)

As of April 1, 2026, all new voluntary GST registrants must adopt InvoiceNow. For GMS users, this is tricky because GMS invoices must not show the GST amount separately—a direct contrast to standard e-invoicing.

How Bestar Helps:

• InvoiceNow Integration: We assist in selecting and configuring "InvoiceNow-Ready" accounting software that supports the unique invoicing requirements of the Gross Margin Scheme.

  
  

• Custom Invoice Templates: We ensure your sales invoices carry the mandatory legal statement: "Goods sold under GST Gross Margin Scheme. Both seller and buyer cannot claim input tax."

  
  

• Grant Assistance: We help SMEs tap into the Productivity Solutions Grant (PSG) or the $1,000 InvoiceNow Adoption Grant to offset the costs of upgrading their digital systems.

4. Accurate GST Computation (The 9/109 Rule)

Calculating the "tax fraction" on margins rather than the full price requires precision. Mistakes in this calculation can result in under-reported output tax.

How Bestar Helps:

• Precise Calculations: We manage your tax computations using the 9/109 fraction for 2026, ensuring that losses are handled correctly (treated as 0 margin) and not improperly offset against gains.

  
  

• GST F5/F7 Filing: We handle the preparation and submission of your GST returns, ensuring the total value of standard-rated supplies is reported accurately in Box 1.

Why Choose Bestar?

At Bestar, we don’t just provide accounting; we provide strategic tax optimization. By accurately applying the Gross Margin Scheme, we help you maintain competitive pricing in the second-hand market while protecting your profit margins from "tax on tax."

Key Benefits at a Glance:

Service	Impact
GMS Health Check	Prevents penalties and identifies past errors.
InvoiceNow Setup	Meets the April 2026 digital mandate.
Monthly Bookkeeping	Keeps your Stock Book updated in real-time.
IRAS Representation	We handle the communication if you are audited.

Is your business ready for the 2026 GST digital mandates? Contact Bestar today for a consultation on how we can streamline your Gross Margin Scheme compliance and digitalize your tax workflows.