Getting Ready for GST ASK Review

General

Despite having a simple concept, Goods and Services Tax (GST) is not a tax that is simple to comply with. Our Assisted Self-help Kit (ASK) Annual Reviews conducted in accordance with the guidelines issued by the Inland Revenue Authority of Singapore has consistently revealed errors in almost every case we undertook.  Some compliance errors are more common than others and these are encountered in almost every client we have reviewed. Where the errors involve GST – i.e. there are errors in the amount of GST paid to or refunded by IRAS, quantification of the errors for the past 5 years needs to be undertaken and reported to IRAS.

Common errors encountered in ASK Reviews

So what are some of those common errors seen in our ASK Reviews for GST returns? Two of the common GST errors encountered were:

1. Wrongly treating supplies as zero-rated when they should be standard-rated
2. Wrongly claiming GST input tax on prohibited expenses

Wrongly treating supplies as zero-rated is one of the most common GST errors having financial implications (and potentially, penalties). Commonly, supplies to overseas customers are wrongly treated as zero-rated when goods are delivered locally in Singapore. This include goods delivered locally by the supplier or collected by customers’ freight forwarding agents which are not within the Company’s control. For zero-rating, the local supplier must be certain that the goods will be exported and the required documents are maintained to support the zero-rating for those supplies. It is also common for local suppliers to zero-rate their supplies because their own purchases of the same goods have been zero-rated especially for purchases on behalf of overseas persons.

There may also be certain services provided to overseas persons that do not qualify for zero-rating as they may not be considered as international services. For example, services supplied to overseas customers that are in connection with land or goods located in Singapore at the time the services are provided do not qualify for zero-rating.

Another common error is claiming GST input tax on prohibited expenses like medical and private car expenses.

Other than the above, other common GST errors are:

1. Insufficient documents maintained to support zero-rating of supplies
2. GST was not charged on sale of scraps or by-products
3. GST was not charged on disposal of fixed assets including motor vehicles
4. Realised exchange gains or losses were not reported as exempt supplies
5. Wrongly reporting out-of-scope supplies as zero-rated supplies

There can be significant financial and non-financial penalties for failing to apply the correct GST treatment and to file accurate GST returns. It is important for the preparer and reviewer (if any) of the GST returns to be familiar with the intricacies of the GST laws and regulations. GST is a transaction-based tax which has to be self-assessed (i.e. the Company has to determine the correct GST treatment for each transaction). If the  Company does not have adequate resources to ensure proper preparation of its GST returns, it should consider engaging a consultant to review its GST returns before submissions.