May I know the tax code for gain on disposal of fixed assets?
Is the disposal a supply?
Disposal of asset can be a supply or not a supply.
If the asset is bought before GST era(without GST incurred), and dispose in GST era, then it is a supply.
If bought after GST era,
- If the asset is blocked from input tax claim (for example passenger car) , then it is not a supply when disposed.
- Otherwise (asset which is not blocked)
- If disposal with a gain (receive payment), then it is a supply.
- If disposal without a gain(maybe just donate it), then have 2 conditions
- It is a supply (deem supply) if the asset entitled a credit of input tax
- Otherwise, it is not a supply
Is the asset entitled a credit of input tax?
The asset is entitled a credit of input tax means
- The asset is subject to GST when acquisition and,
- The input tax on the asset is claimable.
This is some of the example which the asset is not entitled a credit of input tax,
- The asset was bought from non-registered person (not subject to GST), or ,
- The asset was bought before GST era, or,
- You provide public transport service (people who provide exempt supply cannot claim all the input tax).
|Disposal of asset||Gain / receive payment||Tax code|
|Is a supply||Yes||SR|
|Is a supply||No||DS*|
|Not a supply (blocked input tax)||Yes||OS|
|Not a supply||No||–|
* It is call deem supply.