Indirect Tax

GST – reduce costs and release working capital

Jeremy O’Neill Jeremy O’Neill

Whilst Deputy Prime Minister and Finance Minister Heng announced an estimate of nearly $60bn worth of welcome measures to support the economy through the Covid-19 pandemic in the “Resilience” and “Solidarity” budgets, many businesses will still be seeking further ways to reduce costs and improve their overall cashflow position.

None of the nearly $60bn worth of announcements related to alleviating GST pressures experienced by businesses, except for a separate notification of an 11-day filling and payment extension for the March 2020 GST return. However, indirect taxes such as GST typically have a significant impact on cashflow and, for many clients, represent an absolute cost. It is often forgotten that GST applies to the business’ throughput (sales + purchases) and therefore, has a material impact on cashflow.

Our experience is that GST is deceptively simple but yet, the effective management of GST is often overlooked.  However, during difficult times, there can be significant cash and cashflow savings that can be generated by focussing on improving the overall impact of GST on working capital and the ‘bottom line’.

Some of the common areas where savings can be realised include:

  • Changing your return filing frequency to receive GST refunds faster, where a business is in a regular repayment situation
  • Accelerating recovery of GST on purchases e.g. utilising input tax accruals, optimising GST return period
  • Ensuring that output tax is accounted for at the correct tax point (earlier of invoice or payment) to avoid late payment penalties and paying output tax earlier than required
  • Identifying GST incorrectly blocked on purchases or employee expenses
  • Seeking to identify where GST is being accounted for at 7% which could benefit from zero—rating
  • Mitigate cashflow costs from having to pay import GST upfront, through IRAS approved import GST relief schemes (Major Exporter Scheme, Import GST Deferment Scheme etc)
  • Benefit from GST group registration to avoid charging GST on intercompany billings and claiming bad debt relief for GST
  • Claiming relief from GST under the transfer of going concern rules in any consolidation, reorganisation or disposal of business assets
  • Avoid tax risks and penalties through a health-check review or tax process improvements.

There are other mechanisms to deliver GST savings, which generate real cash inflows to the business ranging from good housekeeping to efficient GST structuring arrangements. A number of these are sector specific and can be unique to your business. 

We recognise that each business is distinct and our approach seeks to reflect that.  We typically adopt a phased approach to reviewing your particular position.

Phase 1 – Scope

Our experience has shown that by investing time at the outset of savings-led reviews in understanding our clients and their circumstances, reduces the overall timescales and costs involved for both parties.

Phase 2 – Focus and approach

Using a consultancy-led approach, we gather information to identify a range of savings opportunities and use of analytical skills and solutions to provide an estimation of the likely value of each.  During this phase we would be able to identify the ‘ease of implementation’ for each idea and how quickly the benefits can be realised. 

Phase 3 – Implement

We agree with you the areas that represent the greatest potential for delivering savings and work on those you wish to pursue.  Our experienced indirect tax specialists will then proceed and agree an implementation timetable with you and seek to deliver the savings. 

How we can help

Our indirect tax team has wide experience in undertaking specialist GST reviews and structuring arrangements.

Feel free to contact your Grant Thornton contact person and we would be pleased to have a preliminary discussion.