Common Errors to Avoid While Filing for GST in Singapore
Goods and Services Tax (GST), also known as Value Added Tax (VAT) in some countries, is a consumption tax charged on the availability and import of goods and services in Singapore. It is an indirect levy increase in Singapore that is applied as a percentage to the selling cost of products and services offered by GST-registered businesses (currently 7%). Since the Goods & Service tax is charged to the final consumer, it is rarely a cost to the business. Businesses only serve as collection agents for the Singapore tax authority.
Importance of GST Among Singapore Companies
If you’re a registered business, you’ll have to collect Goods & Service tax from your consumers for the goods and services you provide, and then pay the tax to the government. For example, if you charged a client in Singapore S$1000 for your services, you should invoice them S$1070 (S$1000 for your service along with 7% tax). This amount is invoiced to the client on behalf of the tax authorities should be paid to the Singapore tax department via tax filing every quarter. Singapore-based businesses aren’t automatically registered to levy GST. Before they can charge and collect the tax, corporations must apply to IRAS to become a GST registered firm.
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Errors Made During GST Filing
The previous Service Tax and VAT systems allowed the revising of returns only in the event of errors. However, there is currently no mechanism in Goods & Service tax to edit or amend a return that has already been filed. Even though a substitute method for modifying GST returns is being planned, it is not yet in force. A taxpayer cannot change his returns till then. As a result, you should be extremely cautious while filing for the tax returns to avoid the inconvenience of further reconciliations.
Valid Documents Should Be Used to Support Input Tax Claims
Before you create input tax claims, double-check that you meet all of the requirements and that you have appropriate documentation to back up your claims. If the value of your imported products was under-declared or over-declared, you’ll be forced to make revisions to your returns and notify Singapore customs.
When Input Tax Should Be Paid?
When it comes to GST, you should be aware of when input tax must be paid. Registered enterprises that make exempt offers like residential properties lease and sales, etc., should consider the De Minimis Rule’s exempt offer thresholds. Once the De Minimis Rule is satisfied, you can claim all input taxes as usual. You can’t say input tax directly because of the creation of exempt supplies if the De Minimis Rule isn’t satisfied. For input tax that cannot be determined directly due to taxable or exempt supplies, the amount that can be claimed must be calculated accordingly.
Do Not Claim for Input Tax That Isn’t Allowed
The following expenses cannot be claimed as input tax under the GST legislation (specifically, laws 26 and 27):
- Benefits are given to your employees’ family members.
- Costs and operating expenses incurred on automobiles that are either registered in the name of an individual or a business or used for personal or business purposes.
- Membership fees demanded by the recreation and sports clubs.
- Medical costs for your employees unless they are required under the “Work Injury Compensation Act.”
- Deals including Sweepstakes, lotteries, betting, probability games, or fruit machines.
Claim Input Tax Correctly and in the Appropriate Timeframe
Your input tax claim needs to be within the accounting period, which resembles the date on the tax invoice or import permit. It’s pointless to create a claim in a large amount that doesn’t match the required date.
Avoid frequent filing mistakes in Singapore, such as incorrect tax invoices, treatment for gifts, and treatment for the sale of business assets. If this is your first-time submitting GST returns in Singapore and you are unfamiliar with the process, it is strongly advised that you use a skilled tax preparation business to be on the safe side.