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Oct 11, 2007
GST on management, sinking funds inequitable
AFTER reading the letter, 'Why GST on condo sinking fund?' (ST, Oct
, I found this on the Inland Revenue Authority of Singapore website FAQs:
Q:Should GST be chargeable on condominium sinking fund at the point of collection?
A:Although the sinking fund is utilised at a later time for repairs and upgrading works, the time of supply for GST purposes is triggered when the money is collected. Hence, if the management corporation is registered for GST, it has to collect GST ... at the point of collection.
I disagree that 'the time of supply for GST purposes is triggered when the money is collected' because the sinking fund is a reserve fund, which is not necessarily 'utilised at a later time for repairs and upgrading works'.
For example, in the collective sale of my condominium the unutilised sinking fund amounting to over half a million dollars is being refunded by the purchaser. It has not been utilised in any way and GST paid on contributions should be refunded.
With the rise in the GST rate and collective sales, this question is of wide public interest and I hope the authorities will provide a clear answer.
Kenneth Tan Boon Beng
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I, TOO, grappled with the rationale behind the paying of GST on the sinking fund. In addition, I question why GST is chargeable on payments to the management fund.
The management fund is collected from subsidiary proprietors to pay the estate manager, auditors and contractors and GST is payable on such fees. The sinking fund is reserved for future major expenses. In the event that money from the fund is used, GST is payable for the services.
Subsidiary proprietors thus end up paying GST twice: once when the monies are collected by the condo management and a second time when payment is made to service providers.
In the case of the sinking fund, charging GST has this unjust consequence: subsidiary proprietors lose 7 per cent of their money to GST even before they begin to earn interest on amounts kept in time deposits.
Thong Low Meng
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