Current Areas of GST Audits by IRAS – Under-declaration of Supplies

Current Areas of GST Audits by IRAS – Under-declaration of Supplies

IRAS is actively auditing GST-registered sole proprietors who have failed to report the correct amount of supplies and output tax in their GST returns.

Key Considerations:

As a GST-registered sole proprietor, you might assume that only one of your businesses is subject to GST. Alternatively, you might think that fees earned outside of your sole proprietorship aren’t subject to GST, or that the properties you own are personal and not business assets. However, since your GST registration is tied to your name, you must account for and charge GST on all of the following:

• (a) The taxable turnover of all your sole proprietorship businesses.
• (b) The sale or lease of non-residential properties, or the sale and lease of furniture and fittings in residential properties if you are in the property business.
• (c) Any other taxable income derived from your self-employed activities or profession (e.g., income from driving a taxi or private hire car, freelancing as a fitness instructor, bookkeeper, or property agent).

The under-declaration of supplies and output tax in GST returns can arise from the following:

• Omission or under-reporting of sales from one or more businesses (i.e., failing to include taxable turnover from all sole proprietorship businesses).
• Failure to report income from other self-employed activities such as being a taxi driver, freelancer, or commission-based agent (e.g., property agent, insurance agent, or MLM agent).
• Omission or under-reporting of GST on the sale and lease of non-residential properties, or the lease of furniture and fittings in residential properties when the properties are business assets, or if you are involved in property sales/leases as part of your business.
• Omission or under-reporting of proceeds from asset disposal, where input tax was claimed on the purchase.

Recommended Actions:

GST-registered sole proprietors should carefully review all income streams and their GST returns to ensure that GST is correctly accounted for on all taxable supplies. If any discrepancies or errors (including under-declaration of supplies) are found, it is encouraged to voluntarily disclose these errors to IRAS. This will allow you to benefit from reduced penalties or potentially have them waived under the IRAS Voluntary Disclosure Programme.

Consequences of Errors:

Submitting incorrect GST returns, including under-declaring supplies, may result in penalties of up to 2 times the undercharged tax amount. There could also be fines and imprisonment for those found guilty. For expert advice or assistance, please feel free to contact WLP.