Responsibilities of GST-Registered Businesses. Key GST Concepts & Common GST Errors

Transcription

1 Responsibilities of GST-Registered Businesses Key GST Concepts & Common GST Errors 1

2 Responsibilities of a GST- Registered Business Collect and account GST On all taxable supplies of goods and services made in Singapore Issue tax invoice within 30 days For standard-rated supplies to GST-registered customers. If the value of the supply inclusive of GST is $1000, you can issue a simplified tax invoice. For non-gst registered customers, you can issue a commercial invoice or receipt. 2

3 Responsibilities of a GST- Registered Business (Customer s Name) TAX INVOICE Gallery Photo Supplier 888 Jalan Ang Teng Singapore GST Reg No: M K (Customer's Address) Date: 1/1/2014 (Customer's Address) Invoice No: F Type of Supply: Cash / Credit Sale S/No Description Qty Unit Price Total Discount Total ($) ($) ($) ($) 1 Yashica MG Pentax Z-1 Body 20 1,000 20,000 1,000 19, Total 19, Add 7% 1, Amount Due: 21, Thank you. We look forward to being of service to you again. Sample of a tax invoice Remember : Must A reflect your GST registration number! 3

4 Responsibilities of a GST- Registered Business Record-Keeping Includes tax invoices, receipts, import and export documents, purchase orders/delivery notes etc. To keep for at least : 5 years from the end of accounting period. E-file GST returns and make payment promptly Within 1 month from end of prescribed accounting period. Example: GST F5 return for 01 Jan Mar 2015 to be e-filed and payment to be made by 30 Apr

5 Responsibilities of a GST- Registered Business Show GST-inclusive prices On all prices displayed, advertised, quoted and published to the public. From 1 Apr 2015, if both GST-inclusive and GST-exclusive prices are displayed, the GST-inclusive price must be at least as prominent as the GST-exclusive price. Failure to comply with each of these price display requirements is an offence that can result in a fine of up to $5,000. Only exceptions are hotels and F&B businesses which impose service charge. 5

6 Responsibilities of a GST- Registered Business Price Display Format Acceptable Not Acceptable $107 $100 + $107 w/gst $107 (inclusive of GST) $107 w/gst ($100) $107 w/gst ($100) $107 w/gst ($100 w/o GST) $100 + GST $ % GST $100 + $7 GST $107 w/gst ($100) $100 w/o GST ($107 w/gst) 6

7 Responsibilities of a GST- Registered Business Show GST-inclusive prices On all prices displayed, advertised, quoted and published to the public. Only exceptions are hotels and F&B businesses which impose service charge. Inform the Comptroller if you: Transfer your business. Transferee cannot use the same GST number as the transferor. Cease your business. To apply for cancellation of GST registration. 7

8 Key GST Concepts Output Tax GST Collected On Local Supplies of Goods & Services less Input Tax GST Paid on Business Purchases/Expenses (including imports) Net GST Payable/ Refundable 8

9 Key GST Concepts Output Tax > Input Tax Payable to Comptroller Net GST Input Tax > Output Tax + - Refundable from Comptroller 9

10 Key GST Concepts What is a Supply? Supply includes all forms of supply done for a consideration. Forms of supply can be either goods or services. 10

11 Key GST Concepts Type of Supply Taxable Standard-Rated (7%) Zero-Rated (0%) All others Export of goods International Services Non- Taxable Exempt Out-Of-Scope Financial Services Sale of Investment Precious Metals Sale/lease of Residential Properties Private Transactions Third Country Sales Sales made within Free Trade Zones 11

12 Key GST Concepts Conditions for Input Tax Claims You are GST-registered You must be the recipient of the supply Goods/services are for business purpose Input tax directly attributable to taxable supplies Supported by valid tax invoices/simplified tax invoices/import permits Expenses are not disallowed under Reg 26 & 27 12

13 Key GST Concepts Disallowed Expenses under Reg 26 & 27 Club subscription fees Medical & accident insurance premiums* Medical expenses* Family benefits Costs & running expenses of a motor car * Unless they are obligatory under Work Injury Compensation Act or under any Collective Agreement within the meaning of the Industrial Relations Act. 13

14 Common GST Errors No. 1 : Disposal of fixed assets Our company is selling some of our old assets such as computers, furniture etc. We don t need to account for GST since this is not our main business activity. The sale of fixed assets is treated to be in the course or furtherance of business, even though it is not your main business activity. So long as you are GST-registered and the assets are sold locally, you are still required to account for GST based on the consideration received. Remember : GST is a transaction-based tax. Need to review all transactions, including those not in the normal course of business! 14

15 Common GST Errors No. 2 : Trade-In Co. A buys a new machine at $1,500 from Co. B. At the same time, Co. A is trading-in its old machine for $300. Both Co. A and B are GST-registered. 7% GST should be charged on the net amount i.e. $1,200. In a trade-in, there are 2 separate supplies. Co. B is supplying the new machine to Co. A and should charge 7% GST on the full selling price i.e.$1,500. In turn, Co. A is supplying the old machine to Co. B and should charge 7% GST on the trade-in value i.e. $

16 Common GST Errors No. 3 : Zero-rating goods delivered locally Our local customer requested us to deliver the goods to their warehouse in Jurong, which they will later export to their own overseas factory. They have promised to provide us with the export documents within 60 days. Hence, we can still zero-rate our supply to them. No. In order to zero-rate, you must be very certain that the goods will be exported. This means that you must either export the goods yourself or via a freight forwarder and obtain the relevant documents within 60 days. If you deliver to the customer within Singapore, this will be treated as a local supply and GST is chargeable at 7%. 16

17 Common GST Errors No. 4 : Insufficient Export Documents So long as we have the Bill of Lading or Airway Bill to show that the goods left Singapore, the supply can be zerorated. It doesn t matter if the BL or AWB reflects our freight forwarder s name instead. For zero-rating, you need to maintain all the documents listed in Guide on Exports. One of the documents is the BL or AWB reflecting your company s name. For goods that are consolidated before export by appointed freight forwarder/handling agent, a subsidiary export certificate/note of shipment issued by the freight forwarder/handling agent in your company s name is to be maintained for proof of export to substantiate zero-rating. Remember : The export documents are very important in order to zero-rate your supplies of goods! 17

18 Common GST Errors No. 5: Timing of Input Tax Claims We can only claim the GST incurred on goods purchased or imported into Singapore when the goods are sold and output GST is accounted for. Input tax can be claimed based on the date of suppliers tax invoices or import permits, as long as all the conditions are satisfied. It need not tally with the timing of your output tax. 18

19 Common GST Errors No. 6: Deriving input tax from value of taxable purchases The total value of our taxable purchases is $2,000. Hence, we can calculate input tax by using 7% of $2,000 (i.e. $140). You should compute your input tax based on the GST amount reflected on your suppliers tax invoices and import permits. 19

20 Common GST Errors No. 7 : Claiming input tax without supporting documents My related company made some purchases from a GSTregistered supplier but the tax invoice is addressed to my company. We can claim the input tax based on this invoice. No. Since the purchase was not contractually made by your company, you cannot claim the input tax despite the tax invoice being addressed to your company. Your related co. also cannot claim the input tax as they do not have a valid tax invoice. You should request the supplier to re-issue the tax invoice to your related company. 20

21 Common GST Errors No. 8 : Claiming for disallowed expenses Our company pays for all the staff s medical and accident insurance premiums and medical expenses. We also have a few company cars that certain staff can use for business purpose. Since the tax invoices are in the company s name, we can claim the input tax. Staff s medical and accident insurance premiums and medical expenses are disallowed expenses under Reg 26, unless they are obligatory under the Work Injury Compensation Act. Motor car expenses are also disallowed under Reg 27. Hence, the input tax is not claimable, notwithstanding the tax invoice is in the company s name. 21

22 Common GST Errors No. 9 : Claiming input tax in full even if making exempt supplies My company mainly provides consultancy services but occasionally, we would trade in shares, bonds and financial derivatives. We can claim the input tax for our overheads in full, so long as we have the tax invoices in our name. To claim, your input tax must be attributable to taxable supplies. Since you are making both taxable (i.e. consultancy services) and exempt supplies (shares, bonds, financial derivatives), you cannot just claim the input tax in full. You have to go through the De Minimis Rule Test and if fail, the apportionment formula. Please refer to our Partial Exemption and Input Tax Recovery e-tax guide. 22

23 Common GST Errors No. 10 : Failing to disclose errors I realize that I have made some errors in my supplies value after I have submitted the GST F5 return. As they do not involve GST amounts, I do not have to inform IRAS. All errors in past GST F5 declarations must be disclosed to IRAS. You must submit GST F7 Disclosure of Errors on GST Return if: (a) net GST amount in error affected is > $1,500; or (b) summation of non-gst amounts in error affected is > 5% of the total supplies Otherwise, you can adjust in your current GST F5 23

24 Common GST Errors No. 10 : Failing to disclose errors (Example) Scenario Errors Net GST error 1. Errors involve GST amount only (value of supplies and purchases are correct) Qtr 1: Under-declared output GST by $300 Qtr 1: Under-declared input GST by $200 +$300 - $200 = +$100 Net GST error < $1,500 Correct mistake in next GST F5/F8 return. 2. Errors do not involve GST amount (GST values are correct) Qtr 1: Standard-rated supplies over-declared by $200 Qtr 1: Zero-rated supplies under-declared by $10,000 Qtr 1: Taxable purchases underdeclared by $500 $200 + $10,000 + $500 = $10,700 $10,700 / $105,570 * 100 = 10.1% Non-GST errors > 5% of total supplies. Need to file GST F7. *Assume Box 4 is $105,570 24