Blocked Input Tax in Singapore: GST You Cannot Claim on Cars, Clubs and Medical Costs

Blocked input tax is GST that a supplier validly charged your GST-registered company but that you are not allowed to claim back. Regulations 26 and 27 of the GST (General) Regulations block it for private-use style spending: motor cars, sports and recreation club subscriptions, staff medical expenses and insurance (with narrow exceptions), and benefits for staff family members. These items are easy to miss because the tax invoice looks perfect and the accounting software offers the GST as claimable by default. Check them before filing, and correct any past claim promptly.

Raffles Corporate Services works with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice. This article is general information only and is not legal advice.

Which GST claims are blocked under regulations 26 and 27?

IRAS lists the blocked categories in its e-Tax Guide “GST: Fringe Benefits”. A valid tax invoice is only the first test. Our guide to input tax claims sets out the general conditions. This article covers the exceptions to those conditions: the spending the law blocks even when the business paid for it.

IRAS also notes that GST which is blocked can still be a deductible expense for income tax if the expense passes the normal income tax rules.

Why do blocked claims show up so often in a GST review?

Three habits cause most of the problems.

• Default coding. Bookkeeping software usually applies the standard purchase tax code to a supplier bill. If nobody overrides it for “staff medical” or “car repairs”, the GST goes into the return as input tax.
• Mixed invoices. A single hotel, event or club invoice can contain a claimable staff element and a blocked family or private element.
• A valid invoice feels like permission. It is not. The supply must also be for business purposes and not blocked. Our guide to what triggers an IRAS GST audit explains how IRAS selects and reviews returns.

Because these items are listed in the regulations, they are also simple for a reviewer to test. Expect questions where an expense account name points to a blocked category.

How do the motor car rules work in practice?

The motor car block covers the cost of the car and the running expenses: petrol, maintenance, parking, insurance and chauffeur costs. It applies regardless of the number plate or whether the car is used wholly for business, unless the vehicle falls outside the regulation 25 definition. IRAS says rental cars hired on or after 1 July 1999 are blocked, and so are company cars whose COE was renewed or extended on or after 1 April 1998.

Two practical points often surprise owners.

• Vans and lorries. Goods vehicles are not motor cars for this purpose. IRAS allows the input tax where they are used for business, and incidental personal use by an employee, for example driving home after deliveries, does not stop the claim.
• Car parks. If part of a car park is for parking motor cars, the input tax on that part is blocked. IRAS accepts a reasonable proxy, such as the number of motor car decals issued to employees, to work out the blocked share.

For the income tax side of company cars, see our guide to company car tax and the director’s benefit-in-kind.

Are medical, insurance and family benefits really blocked?

IRAS treats medical expenses as primarily for the employee’s personal benefit, so the general rule is that the GST is blocked. That includes medical examinations done to renew work permits, which IRAS gives as a specific example of a blocked claim. Insurance follows a similar logic: premiums for medical or accident cover are blocked unless the insurance is obligatory under the Work Injury Compensation Act or a collective agreement. For the employment law side of staff insurance, read our guide to group medical insurance.

Family benefits are blocked whenever the cost is incurred for staff relatives. In IRAS’s example, a company puts up a new hire’s family in a hotel suite for a week. The company’s policy entitles managers to a suite for their own stay, so the GST on the suite is claimable, but the extra bed for a child is a family benefit and the GST on it is blocked.

Is entertainment blocked?

Not as a category. Many owners assume “entertainment” is blocked, and they then wrongly skip claims. IRAS’s guide treats food and beverage at company functions, when entertaining clients and at business meetings as claimable, provided the usual conditions are met. What is blocked is the part for a spouse, child or relative, and costs that are really private. Our guide to the year-end party and staff entertainment shows how that works for a dinner and dance with guests.

Example: one quarter, four blocked claims

Example only, not a client case. A GST-registered design company reviews its quarterly return and finds these items, all coded as claimable at 9% GST.

The meals for the client lunch in the same ledger stay claimable. The company corrects the $450 and recodes the four accounts so the problem does not repeat next quarter.

How can you review your own ledger before IRAS does?

1. Export the GST detail report for the period and sort by expense account, not supplier.
2. Flag accounts named for cars, parking, club or gym fees, medical, insurance, staff welfare, family events and relocation.
3. Open each flagged invoice and check whether it falls inside a blocked category or an exception.
4. For mixed invoices, split the blocked portion and keep the working with the invoice.
5. Change the default tax code on those accounts to a non-claimable code.
6. Record the decision for items you treated as exceptions, for example the legal requirement that makes a medical expense claimable.

Keep the invoices and working papers for at least five years. Our guide to GST record-keeping for an IRAS audit lists what to keep.

You found a blocked claim in a filed return: what now?

IRAS says errors must be corrected within five years from the end of the relevant accounting period. If you correct after one year from the end of that period, penalties may be imposed, and IRAS says incorrect returns can attract penalties of up to 200% of the tax undercharged. You have two routes.

• Next GST F5. Allowed under an administrative concession only if the net GST error for all affected periods is not more than $3,000 and the total amount in error in the other boxes (excluding Boxes 6, 7 and 12) is not more than 5% of total supplies in Box 4 for each affected period.
• GST F7. Required if you miss either test, or the error falls outside the concession.

IRAS also says no late payment penalty is imposed on the additional GST if you file the F7 within one year of the original statutory filing deadline and meet the Voluntary Disclosure Programme conditions. Our article on why voluntary disclosures fail explains the usual mistakes.

Frequently asked questions

Can I claim GST on a company van used by the driver to commute?

IRAS allows input tax on vehicles other than motor cars, such as vans, lorries and motorcycles, when used for business. It states that personal use by the employee is acceptable if incidental to doing the job, for example driving the vehicle home after the day’s deliveries.

Can I claim GST on a Grab or taxi ride for a client meeting?

IRAS says taxi and private hire fares are unlikely to carry GST, so you generally claim only GST on booking fees and card administration fees. From 1 April 2022, pay-per-trip chauffeured private hire services such as airport transfers are claimable if the tax invoice shows GST charged.

Is staff medical insurance ever claimable?

Only where the insurance or compensation is obligatory under the Work Injury Compensation Act or a collective agreement under the Industrial Relations Act. Voluntary group medical or accident cover is blocked.

Can I claim GST on professional body membership fees?

IRAS treats entrance and subscription fees to professional bodies as claimable where the membership is relevant to the employee’s job. The block applies to subscriptions charged by sports and recreation clubs.

If the GST is blocked, can the cost still be an income tax deduction?

It can, if the expense itself is allowed under the normal income tax rules. IRAS says the blocked GST is then deductible too. Some costs, such as running a passenger car, fail the income tax test for separate reasons.

Need help reviewing GST claims?

If you want your GST coding checked or a past return corrected, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133. We can review your ledger for blocked categories, prepare the GST F5 and any F7 workings, and keep the supporting records organised for IRAS.

Kevin Yeo, Raffles Corporate Services