The GST law was made based on the UK and New Zealand VAT laws and is applied by Inland Revenue Authority of Singapore (IRAS). The rates and laws change regularly and only a competent consultancy firm providing accounting services in Singapore are aware of the frequent changes in the law.
What does GST mean for your company?
If you are a GST registered company you must collect GST from your clients for the goods and services provided by your company. Then you need to pay the tax you have collected to the Singapore tax authority. You must bill your customer your product price + the GST amount unless you want to pay the GST from your own pocket. For example, assuming that the GST rate is 7% and your product’s price is 100 dollar, you must bill your customers 107 dollar including the 7% GST.
Recently, a sole proprietor, known as Yong, was sentenced to 8 weeks of jail for understating his business’s GST. There was also a penalty of $ 109,102.77!!! IRAS conducts regular audits of GST registered business and during the process, Yong’s business named “HomeGround Trading” was found to have been deliberately under reporting GST collected i.e. output tax. In total, the understated GST was equivalent to $53,433.80. While the main cause of what motivated Yong to evade tax is yet unknown, it is reasonable to assume that he didn’t get his accounting and tax advice from professionals who are providing accounting services in Singapore.
Is your company eligible for GST?
You may or may not be forced to register for GST. You can also voluntarily register for GST if you wish. The down side of not registering if you are not forced to is that you cannot recover any GST that you are charged by other vendors i.e. you cannot charge GST on your invoice if you are not GST registered. Registration is compulsory when:
Your annual revenue is over 1 million SGD OR you reasonably expect your business to exceed turnover of 1 million SGD in the next 12 months. In either case, registration is based on your self-assessment and you must register if you are compelled to, otherwise you may be penalised. Using creative accounting to deliberately keep your turnover less than 1 million is also punishable by law.
Charges against Yong
Out of the nine GST evasion charges adding up to $ 53,433.80, he pleaded forgiveness acknowledging 3 charges amounting to $36,367.59. A truly professional and competent firm providing accounting services in Singapore was likely to help Yong make the best outcome out of a bad situation.
A warning for others, GST fraud is severely punished
The common GST evasion is from understating output tax and overstating input tax (by showing sales that never took place). Yong was lucky as the law can penalize any offenders up to 3 times the amount of undercharged amount, fine of up to $10,000 & up to 7 years of imprisonment.
It’s never too late
Even if you were involved in malpractice before, you can disclose it to the IRAS and it will count in your favour when actions will be considered against you. IRAS also has a cash incentive reward for anyone who informs them of a business’s tax evasion.
JM Management is reputably providing accounting services in Singapore and can help you in registering of GST, whether it be voluntary or compulsory. Most companies choose to voluntary register because they can claim the input tax incurred. But when you are registering you should note that there are some additional rules that you must comply with for example, remaining registered for two years and maintaining records for at least five years even if deregistered etc.
JM Management, which is professionally providing accounting services in Singapore, can also help you deregister if you wish to do so. Deregistration is possible when your business ceases operation, or is sold or your sales drop below 1 million SGD. To register an application form along with relevant proof and documents must be submitted to tax authority within 30 days of the day of cessation or sale.
JM Management is an expert consultancy firm on Singapore Goods and Services Tax (GST). GST is similar to the VAT system which is applicable in other countries. Not everyone is up to date with the new GST rules and regulations. JM Management is committed to provide accounting services in Singapore with the highest level of professionalism and competence. Check out more on our other services for more details today.