GST Returns

Avoiding Common Errors in Complying with GST Regulations in Singapore

Regulatory frameworks in Singapore are stringent and constantly evolving; regardless of the industry you’re operating in, there are rules to follow. One such regulation critical for businesses to adhere to are the guidelines related to Goods and Services Tax (GST). Errors in compliance with GST laws and regulations can result in not only financial penalties, but also potentially damages to reputation and disruptions to operations. In this article, we will shed light on the more common mistakes companies often make in GST compliance and offer insights on how to avoid these pitfalls. 

Learn More: Compliance Requirements for Companies in Singapore

1. Failure to Register for GST

An error often made by businesses is the failure to register for GST when they are required to do so – for example, when their taxable turnover exceeds the mandatory threshold ($1 million per calendar year). Monitoring for requirements for GST registration is an essential step to take, and companies must regularly review their taxable turnover and promptly register or deregister as needed.

Additionally, your business may also be liable for GST registration if your purchase of services from overseas suppliers exceed the statutory thresholds. It is important to diligently monitor these transactions to ensure prompt compliance with GST registration requirements and prevent potential penalties for non-registration or late registration. The consequences of not registering for GST promptly are usually severe and can be debilitating for businesses.

2. Applying Incorrect GST Treatment and Inaccurate GST Filing

Making mistakes when accounting for and reporting GST, such as under-declaring sales, applying incorrect GST treatment to transactions, claiming prohibited input tax credits, or claiming them without meeting the required conditions, can lead to penalties. 

Businesses can steer clear of these issues if they implement robust accounting procedures and internal controls, as well as engage the assistance of qualified GST professionals. Appropriately qualified GST professionals can conduct regular reviews of GST returns to help your business avoid filing errors and identify any potential incorrect GST treatment for your transactions. 

3. Not Maintaining Complete and Appropriate Documentation

Not maintaining complete and appropriate required documentation is a common problem that should be avoided. To support your GST treatment and reporting, it is important that your records and documents, including tax invoices, receipts, credit notes and other documents, contain the required details and are properly maintained for the required duration. 

These documents will be essential in the event of an audit by the Comptroller of GST, where comprehensive documentation is not only crucial for a smooth process but also to safeguard the business from potential penalties related to incomplete or inaccurate records.

4. Misclassifying Supplies

Another all-too-common mistake that many businesses commit is wrongly classifying out-of-scope supplies as zero-rated supplies. Such errors can easily be prevented through regular reviews and updating of supply classifications based on changes in business operations or regulations. 

Misclassifying your supplies can have significant implications for GST treatment and may lead to unintended tax liabilities. To ensure alignment with the current regulatory guidelines, make sure to establish a systematic approach to reassess the nature of your supplies periodically. Even if a misclassification of supplies may not have any GST implications, in the sense that there is no additional GST payable to the Government, it will still mean that the GST treatment is incorrect and a wrong GST return has been submitted.

5. Incorrect GST Input Tax Claims

Another common error for GST is claiming prohibited input tax or claiming input tax without meeting the requisite conditions. For example, GST input tax cannot be claimed on medical expenses, club memberships and motor car expenses. In addition, conditions such as having the required supporting documents have to be met before GST input tax may be claimed. Businesses that made exempt supplies may have to apportion their input tax to be claimed if the amount of their exempt supplies exceed certain thresholds.

Businesses operating in Singapore cannot afford to be complacent when it comes to GST compliance. The consequences of making mistakes are far-reaching and may be severe, and should be avoided if possible. By adopting proactive measures, such as conducting regular reviews, or engaging the services of qualified professionals, your business can not only avoid penalties, which can be debilitating in serious cases, but also ensure the path to sustainable growth remains clear. 

At K E Wee & Associates PAC, we offer GST consultancy services to help your business with GST registration checks and compliance with GST regulations, so that you may avoid potential GST-related penalties. Contact us today to find out how our team of professionals can help you