Few things frustrate a GST-registered business more than paying output tax on a sale, then never getting paid by the customer. You have already handed the 9% GST to IRAS, but the invoice is now a bad debt. The good news is that Singapore’s GST system lets you claim that GST back. It is called bad debt relief, and it is one of the most commonly overlooked reliefs available to Singapore companies.
This guide explains what GST bad debt relief is, the strict conditions you must meet, how to claim it, and what happens if the customer later pays.
What Is GST Bad Debt Relief?
When you make a taxable supply, you charge GST (the output tax) and account for it to IRAS in your GST F5 return — whether or not the customer has actually paid you. If the customer then fails to pay and the debt goes bad, you have effectively paid GST out of your own pocket on money you never received.
Bad debt relief lets you recover that output tax by claiming it back from IRAS, provided you satisfy the conditions in the GST legislation. The relief is claimed as input tax in Box 7 of your GST F5 return.
The Legal Basis and Conditions
Bad debt relief is governed by the Goods and Services Tax Act 1993 and Regulation 83 of the GST (General) Regulations, with detailed conditions set out in IRAS guidance. To claim, you must satisfy all of the following:
| # | Condition |
|---|---|
| 1 | You have supplied goods or services and accounted for and paid the output tax to IRAS. |
| 2 | The consideration has been written off in your accounts as a bad debt. |
| 3 | At least 12 months have passed from the date of supply, or the debtor has become insolvent before the 12 months expire. |
| 4 | You have taken reasonable steps to recover the debt. |
| 5 | You keep the required records (including a “refunds for bad debts” account). |
The 12-month rule is the one businesses most often miss. You cannot claim the relief the moment an invoice goes overdue — you must wait until either 12 months have passed from the supply, or the debtor is formally insolvent.
What “Reasonable Steps to Recover” Means
IRAS expects you to have genuinely pursued the debt before writing it off. Reasonable steps typically include issuing reminders and statements of account, sending a formal letter of demand, and, where commercially sensible, commencing legal action or lodging a claim. If the debtor has been wound up, filing a proof of debt in the liquidation counts as taking reasonable steps — see our guide on how creditors recover in a liquidation. You do not need to have exhausted every avenue, but you must show a real effort proportionate to the size of the debt.
How to Claim
1. Confirm eligibility. Check that all five conditions are met, particularly the 12-month or insolvency requirement and the write-off in your accounts.
2. Maintain a refunds-for-bad-debts account. Record the details of each claim: the amount written off, the GST claimed, the customer, the invoice, and the steps taken to recover.
3. Claim in the GST F5 return. Include the GST as input tax in Box 7 of the return for the accounting period in which you make the claim. Our guide to the GST F5 return explains where each figure goes.
4. Keep supporting records. Retain them for at least five years in case IRAS reviews the claim.
If the Customer Later Pays
Bad debt relief is not a windfall. If you claim the relief and the customer subsequently pays all or part of the debt, you must repay the corresponding GST to IRAS. This is done by accounting for output tax on the amount recovered in the return covering the period you received payment. In effect, the relief is a temporary recovery that reverses if the debt turns out not to be bad after all.
The Flip Side: Bad Debt Relief for Your Suppliers
There is a mirror rule. If you are the customer who claimed input tax on a purchase but have not paid your supplier within 12 months, you are required to repay that input tax to IRAS. So bad debt relief cuts both ways: you can reclaim GST on money owed to you, but you must give back GST claimed on money you owe and have not paid. Businesses managing tight cash flow should track both sides. Our GST registration guide sets out the wider compliance picture.
Common Mistakes
The recurring errors are: claiming before the 12-month period has passed; failing to write the debt off in the accounts first; not keeping the refunds-for-bad-debts account; forgetting to repay the GST when the customer later settles; and overlooking the reciprocal obligation to repay input tax on the business’s own unpaid purchases. Each of these can turn a legitimate relief into a compliance problem during a GST audit.
How Raffles Corporate Services Can Help
Raffles Corporate Services helps GST-registered businesses identify bad debts that qualify for relief, verify the conditions, maintain the required records and claim correctly in the GST F5 return. We also flag the reciprocal repayment obligations so you stay on the right side of IRAS. Recovering GST on debts you have already written off is money back in the business — do not leave it on the table.
If your receivables ledger is carrying old, uncollectable invoices, talk to us about whether GST bad debt relief can be claimed.
— The Editorial Team, Raffles Corporate Services