Introduction to Goods and Services Tax (GST)

Goods and Services Tax (GST) is chargeable on any supply of goods or services sold or delivered in any Country, when it is a taxable supply and made by a taxable person in the course or furtherance of the business carried on by him. In some countries, GST is known as the Value-Added Tax or VAT. GST is applicable on nearly all types of goods and services.

Click here to understand the terms and abbreviations used in this functionality.

The table below illustrates the different categories/ examples in the context of GST in Singapore.

In some countries, GST is known as the Value-Added Tax or VAT.

As a normal practice in many countries GST regulations detail the conditions for taxable or Non-taxable supply of good or service. The taxable supply are subjected to a standard / banded rate or zero rates while the Non-taxable supply are further split as exempted and out of scope items. For example, many countries, exemptions are given for the basic banking services viz. opening and maintenance of account, grant of loans etc.

Similarly, goods and services relating to exports and international services are zero-rated. For example, the opening of letter of credit, maintenance and servicing of non-resident accounts etc.

GST can be either Input (paid by the Bank) or Output (collected by the Bank). Input tax is the GST charged on the purchase of goods and services used in the business activity. Output tax, on the other hand, is GST charged and collected on sales/ supplies of goods and services. Input tax credit means tax input claimable by businesses registered under GST.

GST RITC (Recovery of Input Tax Credit)

Special rules unique to the Australian GST system were introduced to allow the partial recovery of input tax credits to be made where the credits relate to certain financial supplies. These rules were introduced to provide fairness and equality among enterprises making financial supplies so that larger financial institutions were not at a competitive pricing advantage compared to small financial institutions as a result of the introduction of the GST into Australia.

Under the new rules, certain supplies provided on or after 1 July 2012 by trustees, responsible entities and third parties to a "recognised trust scheme" will be eligible for a reduced RITC rate of 55%, rather than 75%. A number of services will remain eligible for a RITC at the 75% rate, including:

• Brokerage services.
• Investment portfolio management functions (excluding acting as a trustee or single responsible entity).
• Administrative functions in relation to investment funds (excluding compliance with industry regulatory requirements).
• Custodial services and master custody services.
• Anti-Money Laundering (AML) monitoring and reporting services (other than taxation and auditing services).

Sweeping

You can use this guide to learn how to set up the Sweep feature for transactions where the commission and taxes for GST are collected in a currency that is different from the GST currency. This allows you to redirect these taxes from a non-GST currency account to an appropriate GST currency account for the payment of GST taxes.

You can also use this feature to sweep in refund scenarios where the refund might have taken place already and only the net tax amount needs to be swept. In other cases where sweep already took place before the refund, the refund is initiated from the GST CCY tax account.

The Resweep feature enables you to reverse the sweep entries when the original transaction is reversed.

A total of 6 scenarios can be processed through the Sweep functionality:

• Input Sweep
• Input Resweep
• Output Sweep
• Output Resweep
• Refund Sweep
• Refund Resweep

Value Added Taxes

Value Added Tax (VAT) is the solution which allows the user to calculate the output VAT on liable income sources. The VAT is the tax applied to the domestic consumption of goods and services. The value-added tax is divided into inputs and outputs VAT. According to the regulatory requirement, the invoices are required to be generated for VAT liable fee income. The output VAT is the value-added tax that is calculated and charged on our sales of goods and services if you are registered for VAT. It is charged for sales, both to other businesses and ordinary consumers.

The Value Added Tax functionality aims to enhance the way VAT is calculated, by allowing to compute the outputs VAT as well.

The Value Added Tax functionality allows the user to:

• Capture the VAT registration number, which is required to be captured in the customer on boarding screen.
• Calculate the output VAT on liable income sources.
• Identify the transaction source.

VAT Processing

The price tax separation is required to be divided by the tax collected from charges and accrued income in real-time. This covers the charges collected for banking transactions and accrued incomes collected for loans and deposits or payment due to interests, and letter of credit or miscellaneous deals commissions.

The bank has to pay VAT (Value Added Tax) to government for the generated income. When VAT is already part of the customer payment (could be paid or accrued), it is necessary to separate the real income and VAT portion into the respective GL account codes or internal accounts.

The TAXGST.VAT.DETAILS application is created to store the VAT information extracted from the income. The TAXGST.VAT.TRANS.REF application is created to store the payments ID for the tax entry by contract in the form of a funds transfer or payments ID. The TAXGST.TAXRATE.CHANGE application is created to initiate the VAT adjustment whenever there are backdated changes in the VAT rate.

Various versions are created that allow the user to capture the VAT tax for loans and deposits, payments due, letters of credit, miscellaneous deals, accounts, money markets, and drawings.

The Taxgst Vat Details (ENQ TAXGST.VAT.DETAILS) enquiry is created to allow the user to view the VAT posting for transactions.

The VAT Processing functionality allows the user to:

• Calculate the one time flat VAT charges for transactions.
• Calculate the VAT charges for accrued income, including LD and PD.
• Adjust the tax entries when a back dated tax rate is applied.
• View the VAT posting transactions by dates.

VAT - Tax on Cheque Charge

Value added Tax (VAT) is a tax on domestic consumption of goods and services. The goods imported into the country and the goods and services supplied within the territorial limits of the country are the subject matter of the VAT tax. There are two types of VAT taxes: Input and Output VAT.

This functionality allows the user to calculate the output VAT tax based on liable income sources.

The output VAT is the value added tax that is calculated and charged on our own sales of goods and services, if you are registered for VAT. It is charged on sales both to other businesses and to ordinary consumers.

As per the regulatory requirement, invoices are required to be generated for VAT liable fee income.

Integration with External Systems

Value Added Tax (VAT) is the solution which allows the user to calculate the output VAT on liable income sources.

The Integration with External Systems functionality allows the user to apply VAT on the charges collected from the customers.

The AA Reference and Commission Type fields are added to the TAXREG.GST.DETAILS application to allow the user to identify the particular commission of a specific arrangement.

Fund Manager Rebate

Under this requirement, the customer receives an income called “fund manager rebate”. A corporate action event takes place where in the customer receives rebate amount which is inclusive of GST paid by him earlier. However, since the GST includes recoverable component also, the customer should pay the RITC component if he had already benefitted the RITC earlier.

Fund Manager Rebate corporate action is first setup in the system by marking the field for Fund Manager Rebate as yes in Diary Type. When the fund manager rebate corporate action takes place, a diary should be created. The diary event will be a normal cash income since the fund manager rebate will always be received in cash. In the diary with fund manager rebate event the claim period and invoice details can be entered for future reporting requirements. Once the diary is setup, entitlement created manually or through upload using DFE are eligible to receive the fund manager rebate. The entitlement would hold the customer’s cash income based on which the RITC component to be charged should be calculated. This calculation will be done based on customer’s portfolio and the values available in legal entity structure table. The portfolio should indicate the portfolio’s platform and the legal entity structure should hold the RITC percentage for the respective platform. Once the RITC percentage is identified, the RITC component is calculated on the entitlement amount and charged to the customer.

This functionality will allow the bank to pay fund manager rebate income to customer and deduct the recoverable component of GST if the customer had previously benefitted from the same. It allows the bank user to upload a file containing portfolio income and the system would then create entitlement manually or through upload using DFE based on the details provided regarding entitlement amount.

Charge Validation

The system will prioritize the Refund Version value in the TAXREG.PARAMETER application, over the modules available. Also, the system will update the TAXREG.GST.DETAILS application with the calculated tax amount.

Back Dated Tax Rate

In jurisdictions that have implemented the GST regime, the regulator may specify whether the old tax rate or the new tax rate will be used, if the transactions pertain to a period before the tax rate was changed. For example, in Singapore, the Inland Revenue Authority of Singapore (IRAS) has provided guidelines on the circumstances and scenarios for determining which tax rate to be used for transactions, which pertain to a period, before the tax rate was changed.

This functionality enables banks to apply the back-dated tax rate in the TAXGST module, for select applications and depending upon the nature of the transaction. The list of applications, is given below:

• FUNDS.TRANSFER.
• DX.TRADE (only when DX.COMMISSION is used (In DX.PARAMETER > SYSTEM > SCDX Charge Method = N). This functionality will not work, when commission and tax are configured using SCDX Charge framework. (In DX.PARAMETER > SYSTEM > SCDX Charge Method = Y).
• SAFEKEEP.HOLDING.
• SC.ADVISORY.FEES.
• SAFEKEEP.HOLDING.POSTED.
• SC.ADVISORY.CHG.
• SC.ADVISORY.CHG.POSTED.

• AC.CHARGE.REQUEST.

A new calculation routine which has to be attached in the Calc Routine field of the relevant tax record, has been released to calculate the back dated tax rate.

Movement of records from the TAXREG.GST.DETAILS Application to TAXREG.GST.DETAILS.HISTORY Application on a Defined Frequency

This functionality allows the movement of the records from the TAXREG.GST.DETAILS application to the history application, TAXREG.GST.DETAILS.HIST, which is a mirror of the TAXREG.GST.DETAILS, on a defined frequency. The Sweep and Resweep functionality will not be affected by the movement from the live application to the history application.

The Archival Period field has been attached to the TAXREG.PARAMETER application as part of this functionality, to configure the frequency in which the records will be moved from the TAXREG.GST.DETAILS application to the TAXREG.GST.DETAILS.HIST application. The value will be between 1 and 999 days, suffixed by D, calendar days.

Update of Reversal Date in addition to Reversal Marker in the TAXREG.GST.DETAILS Application

Whenever a transaction is reversed, in addition to Reversal Marker being updated as Y, the Reversal Date will also be updated.

A new field Reversal Date has been introduced to the TAXREG.GST.DETAILS and TAXREG.GST.DETAILS.HIST applications, which will hold the reversal date of transaction.

Provision to Update Other Data in the TAXREG.GST.DETAILS Application (Data at the Discretion of the Bank)

Banks may wish to capture certain details other than what is available as standard data in the TAXREG.GST.DETAILS application. This functionality provides an option for the bank to update the desired details like Statement Entry Id etc., in five fields designated as Local Field(s), by developing a local routine.

The functionality will designate the local fields and provide an option to update the fields. The development to fetch and update the values in the fields will be done locally and will not be in scope of this functionality.

The Local Data Update Rtn field has been introduced to the TAXREG.PARAMETER application as part of this functionality. If the specified value is a valid entry in the EB.API record, the routine will be locally developed, this will update the designated fields in the TAXREG.GST.DETAILS application. The input arguments required will be the TAXREG.GST.DETAILS record Id and the Statement Entry record Id. The output arguments will be the data from the statement entry, which will then be mapped to the designated local fields.