Has anyone encountered gst on additional car loan?

[Hoshi8]

Yep thats what the extra payment is for, the dealer cost on the GST.

 

Banks cannot charge GST for loans (considered under financial services.

Supplies that are exempt from GST include:

• The provision of financial services;
• The sale and lease of residential properties; and
• The import and local supply of investment precious metals (IPM) (effective 1 Oct 2012).

GST need not be charged or paid for exempt supplies.

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Financial Services

The Fourth Schedule to the GST Act provides the list of financial services that are exempt from GST. Examples of these financial services include:

• Charges by banks for the operation of bank accounts
• Exchange of currency
• Issue / sale of shares or bonds
• Provision of derivative that does not lead to any delivery of goods or services
• Provision of loans
• Provision of life policy by an insurance company

For more information and the full list of exempt financial services, please refer to the list of financial services (170KB).

https://www.iras.gov.sg/irashome/GST/GST-registered-businesses/Working-out-your-taxes/When-is-GST-not-charged/Supplies-Exempt-from-GST/

Thanks but maybe the dealer has communicated with me with the wrong terminology. Anyways if I am to go ahead with the 'additional' loan, then I will have to pay for their 'admin fees'.

reimburse dealer for loss? then on other note, u are also losing money. from 100k hike to 120k, end of day, u still need pay 20k extra.. and more interests needed for u to pay...

 

 

 

hahahha.. not bad experience ahh?? ok lor... u happy pay additional money can already loh...

Technically as per the example I quoted, the loan amount increased by another 10% and the interest rate remains the same if I would have taken a lower loan amount therefore there's nothing more except for the admin fees.

[Ahbengdriver]

I think by selling you $120K on paper, the GST amount liable also goes up to $8400 instead of $7000. GST is ultimately payable to govt, thus they just wanna get back what they can?

 Yes I think that's the reason.

 

GST is applied on the price of a good, in this case the car.  if price inflated by 20k to 120k, then this 2ok attracts additional GST.

 

WIth 120k, the loan can be increased to 60k from 50k, but so will the deposit be 60k as well.

 

Better check with PI if that is the case.

 

Knn otherwise

[Limwsv]

If you think it's cheating dan MAS should be informed. Becoz they set the rules for car loan.

 

Housing loan is not the same as the car's hire & purchase act.

 

Why the banks allow it if it's cheating?

 

I think the discussion miss a critical point... the bank may not know about the overtrade as the amount declared typically are not huge, ie quantum of more than 50% of car value.

 

A very important thing to note is that in case of default, if borrower is unable service the loan,  the bank will repossess the car and resell it to recoup the loss.  If the declared value is far too unrealistic, the bank will not be able to recoup the "overtrade" portion of the value.

[polarusbearus67]

I was reading this topic with interest.

 

First of all, let me just say that I know the question TS was asking was whether the 7% GST charge was normal. I am not sure about that but I wanted to highlight over issues rained here.

 

Loan limit - the loan limit is the limit set for Financial institutions when they lend money to purchase a car. I don't think this applies to a "non-financial institution". For example, the AD for Daihatsu (what happened to them?) is a family owned company. If the company provides the loan, it probably wont be subject to these rules.

 

Overtrade - when a car is bought at a price higher than its value. Not much wrong here.

 

Over declaring price of car - don't know how this works. But if you declare a $100,000 car to be $120,000 to get a higher loan from a bank, I suggest you stop now. This is cheating as pointed out by a brother earlier in the thread. I am not sure if you guys recalled property agents inflating the price of homes to get a higher loan from the bank. Many were subsequently charged with cheating.

 

CG

 

 

[Ender]

Overtrade is not cheating bank lah. http://www.sgcarmart.com/news/article.php?AID=8617

 

 

If I'm not wrong, if the dealer is giving additional 10K on the trade-in car price, he's providing a service. GST means goods & service tax hence it falls in the category that's why it's 7% chargeable. But the thing is buyer is trading in his old car or selling the old car to the dealer 7% gst should be considered as well. Logically the 7% should be offset and waived.

 

The overtrade thing is very confusing for buyers. Maybe the authorities should make it clear that overtrade is a service which dealers provides and it's chargeable for gst.

 

If buyers are able to meet the loan restrictions there's no need for overtrade. So TS go find ways to meet the deposit requirement so that you do not have to deal with the overtrade thing. MCF got a lot of loaded members who buy cars using full cash. Page for them.

Trying to understand this overtrade thing.

If the dealer increase the car price from$100,000 to $110,000. Assuming Cat B, wouldn't the buyer have to pay a deposit $55, 000 instead of $50,000? 

Although his trade-in car increase by $10,000, but overall the cash component of his deposit only reduce by $5,000 instead of $10,000. And he has to take $55,000 loan instead of $50,000.  Also must pay GST for $10,000. Net is pay more by the end of the loan.

This sounds like super bo hua for the buyer. 

[Thedecemberone]

Wah! I get groggy after reading the posts. Seems like it's better to stay away from PI. Either that or if really financially cash strapped, go for one that you can afford (Used car or lower your expectation) rather than pay through your nose. 

[valian]

Trying to understand this overtrade thing.

If the dealer increase the car price from$100,000 to $110,000. Assuming Cat B, wouldn't the buyer have to pay a deposit $55, 000 instead of $50,000? 

Although his trade-in car increase by $10,000, but overall the cash component of his deposit only reduce by $5,000 instead of $10,000. And he has to take $55,000 loan instead of $50,000.  Also must pay GST for $10,000. Net is pay more by the end of the loan.

This sounds like super bo hua for the buyer. 

 

the 10k increase in new car and trade in car value is just paper play.

 

Scenario A

Car: $100000

Loan: $50000

DP needed: $50000 - trade in value 

 

Scenario B

Car: $100000

Declared Value:$110000

Loan:$55000

DP needed: $45000($100K-$55K)- trade in value

 

He still pays $100K for the car, just that he downpays abit lesser

[Galantspeedz]

Bro not nice to expose dealer name lah. But it seems that it's common practice nowadays to charge surcharge whatever name you called it.

 

sadly, i would say it is common practice for desperate people only.... if the buyer can show that he will have no qualms going somewhere less because of a better deal.... i am sure many things can be nego

[Kusje]

sadly, i would say it is common practice for desperate people only.... if the buyer can show that he will have no qualms going somewhere less because of a better deal.... i am sure many things can be nego

 

I don't wanna continue arguing on whether this is considered cheating or not since all of us would have made up our minds already but in this situation, the "admin fee" is definitely because of a cost increase to the PI. Whether or not he will absorb depends on whether he has the margin for it in his selling price. Either way, buyer pays.

[Ender]

the 10k increase in new car and trade in car value is just paper play.

 

Scenario A

Car: $100000

Loan: $50000

DP needed: $50000 - trade in value 

 

Scenario B

Car: $100000

Declared Value:$110000

Loan:$55000

DP needed: $45000($100K-$55K)- trade in value

 

He still pays $100K for the car, just that he downpays abit lesser

Scenario B don't sound right to describe overtrade.

 

Refer to this site, The new loan and new deposit will be  based on the new inflated price. The only perceived goodness is the buyer has a extra $10,000 to trade in.

http://singaporemotoring.blogspot.sg/2008/06/overtrade-for-new-ride.html

Example:

Value of old ride = $10,000 (market value - outstanding loan balance)

Price of new ride = $70,000

Required downpayment = 30% x $70,000 = $21,000

Maximum loan amount = 70% x $70,000 = $49,000

Shortfall = $21,000 - $10,000 = $11,000

 

Overtrade amount = OT

In order to meet maximum 70% loan amount, 30% x (70,000 + OT) = 10,000 + OT

Solving the equation, OT = 15,715

Inflated price of new ride = $85,715

New downpayment = 30% x $85,715 = $25,715 <- New Deposit increase

Maximum loan amount = 70% x $85,715 = $60,000 <-New loan amount increase

 

 

 

Edited April 1, 2016 by Ender

[Limwsv]

I was reading this topic with interest.

 

First of all, let me just say that I know the question TS was asking was whether the 7% GST charge was normal. I am not sure about that but I wanted to highlight over issues rained here.

 

Loan limit - the loan limit is the limit set for Financial institutions when they lend money to purchase a car. I don't think this applies to a "non-financial institution". For example, the AD for Daihatsu (what happened to them?) is a family owned company. If the company provides the loan, it probably wont be subject to these rules.

 

Overtrade - when a car is bought at a price higher than its value. Not much wrong here.

 

Over declaring price of car - don't know how this works. But if you declare a $100,000 car to be $120,000 to get a higher loan from a bank, I suggest you stop now. This is cheating as pointed out by a brother earlier in the thread. I am not sure if you guys recalled property agents inflating the price of homes to get a higher loan from the bank. Many were subsequently charged with cheating.

 

CG

 

Just one to highlight that point 1 is not possible.  Any company or individual expressly offering money to any other person or business entity with a view to contractual agreement on commercial basis will be subjected to need to get a license from MAS and thus subjected to MAS rules.  Does not matter whether the company or individual status is family business, car trader, pawnshop and so on...

 

Unless they want to be illegal money-lender...

 

So, you lend money to one neighbour is okay on private basis.. but when you start lending money to your whole block, you better get a license.

[Hoshi8]

sadly, i would say it is common practice for desperate people only.... if the buyer can show that he will have no qualms going somewhere less because of a better deal.... i am sure many things can be nego

I went to first PI I signed already. Should have done more home work before committing.

[Enye]

nowadays car buyers are no longer scared by the term admin fee

 

so those shady car dealers need a stronger term backed by govt

 

GST

 

[Galantspeedz]

I went to first PI I signed already. Should have done more home work before committing.

 

since signed already , nothing much to consider... personally i would take the option of 50% DP. Anyway 40% and 50% DP not much difference

[Hoshi8]

since signed already , nothing much to consider... personally i would take the option of 50% DP. Anyway 40% and 50% DP not much difference

yes would pay 50% down to avoid future issues. Thanks bro

[polarusbearus67]

Just one to highlight that point 1 is not possible.  Any company or individual expressly offering money to any other person or business entity with a view to contractual agreement on commercial basis will be subjected to need to get a license from MAS and thus subjected to MAS rules.  Does not matter whether the company or individual status is family business, car trader, pawnshop and so on...

 

Unless they want to be illegal money-lender...

 

So, you lend money to one neighbour is okay on private basis.. but when you start lending money to your whole block, you better get a license.

 

Bro,

 

You are absolutely correct. My bad

 

CG

[Spurman]

Then the dealer better be passing the collected tax to IRAS.

Iras true winner

[Kangadrool]

Must be a Bolehian... Hahahahaha....

 

They made GST so complicated. So complicated until their telco prepaid cards so complicated. Opportunities for merchants to makan consumers also.