Updated GST guidance, treatment of termination expenses (COVID-19)

GST guidance addresses what amounts can be claimed as expenses incurred in the termination and winding-up of a business.

Given the economic implications of the coronavirus (COVID-19) pandemic, the GST guidance addresses what amounts can be claimed as expenses incurred in the termination and winding-up of a business.

Section 3(5) of the GST law provides that anything done in connection with the termination or intended termination of a business is treated as being done in the course or furtherance of that business. Hence, expenses relating to the termination of business would be regarded as business expenses. If a GST-registered business is making only taxable supplies before the winding-up, the business would be allowed to claim full input tax on termination expenses, since these expenses are attributable to that fully taxable business. While the IRAS guidance takes the view that GST on termination expenses is not directly attributable to past supplies, the expenses are residual in nature and thus fully claimable pursuant to section 3(5).

Source KPMG

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