If you buy and sell used goods for a living, GST can feel like a trap. You often buy stock from members of the public or from non-GST-registered sellers, so there is no input tax to claim. Yet when you resell, the default rule says you must charge 9% GST on the full selling price, taxing the entire value of the item even though you already paid for most of it GST-inclusive. The Gross Margin Scheme (GMS) exists precisely to remove this unfairness for dealers in second-hand goods.
This guide explains how the GMS works in 2026, who can use it, how to compute the GST on your margin, the self-review process that replaced the old approval requirement from 1 July 2025, and the records you must keep.
What is the Gross Margin Scheme?
Under the Gross Margin Scheme, a GST-registered dealer charges and accounts for GST only on the gross margin of a sale, that is, the difference between the selling price and the purchase price of the goods, rather than on the full selling price. The scheme recognises that when goods are bought free of GST (typically from private individuals or non-registered businesses), taxing the full resale value would tax the same underlying value twice.
The scheme is most commonly associated with the second-hand motor trade, but it applies to dealers in a wide range of used goods, from pre-owned watches and jewellery to antiques, artwork, and used equipment, provided the eligibility conditions are met.
Who can use the scheme, and for which goods?
To apply the GMS to a sale, the following must generally hold:
- You are a GST-registered business dealing in second-hand or used goods.
- The goods were acquired free of GST, for example bought from a non-GST-registered person, or bought from another dealer who themselves sold to you under the GMS.
- You did not claim input tax on the purchase of the goods (there was none to claim).
- The goods are eligible second-hand goods, not new goods.
If you bought stock from a GST-registered supplier who charged you GST and gave you a tax invoice, that purchase falls outside the GMS: you claim the input tax and apply GST normally on the resale. The GMS is specifically for the “no input tax available” scenario.
How to compute GST under the Gross Margin Scheme
The mechanics are straightforward. GST is charged on the gross margin, and the margin is treated as GST-inclusive:
- Gross margin = selling price − purchase price.
- If the selling price is equal to or lower than the purchase price, the margin is nil and no GST is chargeable.
- If the selling price is higher, the GST is 9/109 of the gross margin (because the margin is GST-inclusive).
Worked example. A used-goods dealer buys a pre-owned watch from a private individual for S$5,000 (no GST). The dealer later sells it for S$6,090. The gross margin is S$1,090. GST is 9/109 × S$1,090 = S$90. The dealer accounts for S$90 as output tax, not 9% of the full S$6,090. If the same watch had instead sold for S$4,800, the margin would be negative, so no GST would be due.
Invoicing under the GMS
A crucial rule: when you sell under the Gross Margin Scheme, you must not show any GST amount separately on your invoice, and you should not issue a tax invoice. The GST is embedded in the price. Consequently, your buyer, even a GST-registered one, cannot claim any input tax on a GMS purchase. This is the trade-off that makes the scheme internally consistent.
The 2026 self-review process
Historically, dealers had to seek IRAS approval before using the Gross Margin Scheme. With effect from 1 July 2025, that approval requirement was removed. A GST-registered business may now self-assess its eligibility using IRAS’s “Self-Review of Eligibility to Use the Gross Margin Scheme” checklist and simply apply the scheme once satisfied it qualifies. This is a welcome simplification, but it shifts responsibility onto the dealer: because you no longer obtain a stamp of approval up front, your documentation must be able to withstand a later IRAS review.
Improper use of the GMS, for example applying it to goods bought with GST or failing to keep the required records, exposes the dealer to recovery of the under-accounted GST and to penalties under the GST legislation.
Records you must keep
For each item sold under the GMS, keep records that establish both the purchase and the sale, so the margin can be verified:
- Purchase records: a purchase invoice or a signed purchase form showing the seller’s details, a description of the goods, the date, and the price paid (evidencing that no GST was charged).
- Sales records: the sales invoice (with no GST shown separately) and the selling price.
- A stock or margin record linking each purchase to its corresponding sale and computing the GST on the margin.
Because the GMS turns on matching each sale to its original cost, disciplined bookkeeping is essential. The same records that support your GMS position also feed your ordinary GST return and your annual accounts, so tidy systems pay off across the board.
How the GMS fits the wider GST picture
The Gross Margin Scheme is one of several special GST schemes designed for particular business models. Before considering it, a dealer should be clear on when GST registration is required. Businesses managing cash flow on imports may also look at the Cash Accounting Scheme or, for import-heavy traders, the Import GST Deferment Scheme. Where the GMS does not fit, remember the ordinary rules on structuring transactions still apply. The authoritative reference is the IRAS page on the Gross Margin Scheme, and the sector rules for vehicles are on the IRAS motor trade pages.
Key takeaways
The Gross Margin Scheme lets Singapore dealers in second-hand goods charge GST only on their margin, not the full resale price, when the stock was bought GST-free. Compute GST as 9/109 of the margin, charge nothing where the margin is nil or negative, never show GST separately on a GMS invoice, and self-assess your eligibility using the IRAS checklist since the approval requirement ended on 1 July 2025. Above all, keep purchase-to-sale records that can prove the margin, because with self-review the burden of getting it right now sits squarely with you.
— The Editorial Team, Raffles Corporate Services