May I know the tax code for gain on disposal of fixed assets?

3 Answer(s)

DS

Answered on August 28, 2015. 2015-08-28 07:41:58
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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)
    1. If disposal with a gain (receive payment), then it is a supply.
    2. If disposal without a gain(maybe just donate it), then have 2 conditions
      1. It is a supply (deem supply) if the asset entitled a credit of input tax
      2. 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

  1. The asset is subject to GST when acquisition and,
  2. 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,

  1. The asset was bought from non-registered person (not subject to GST), or ,
  2. The asset was bought before GST era, or,
  3. You provide public transport service (people who provide exempt supply cannot claim all the input tax).

 

Tax code

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.

 

Answered on August 28, 2015. 2015-08-28 16:26:14

Hi,

Thanks for your time for answering in details.

Below is our actual case for your reference, we have bought a lorry before GST and the lorry has been stolen after GST and we received insurance compensation after few months. There will be gain on disposal of fixed asset due to the lorry has more than 5 years (fully depreciated).
For your illustration, it should be “Supply”, and there was a gain on disposal of fixed assets and should be “SR”.
We have to remit the 6% of GST out of the compensation received to government which is same treatment as sales?
Should we issue any tax invoice to insurance company for the compensation received?

Thanks for your feedback.

on September 1, 2015. 2015-09-01 01:19:45

Hi SJ,

It involved disposal asset + transition period + insurance claim(stolen) in your case. Could you please create a new question so we can discuss about this?

Thanks 🙂

on September 2, 2015. 2015-09-02 15:52:56

Hi all,

i would like to ask if the fixed asset disposal which subject to GST (GST Code: SR), this particular supply (SR) will need to be excluded from the residual input calculation? if Yes, is it apply to all the fixed asset (small value like furniture & fitting) or only involved on Motor Vehicle or machinery which is huge in amount?

on August 19, 2017. 2017-08-19 11:35:24
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Please go through and refer to GST Guide on Partial Exemption which can be downloaded from Customs website.

Answered on August 21, 2017. 2017-08-21 03:26:31
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