Current Areas of GST Tax Audits by IRAS
Businesses with Low-Value GST Refund Claims
In line with its risk-based compliance strategy, IRAS has initiated an audit programme targeting GST-registered businesses that have made low-value GST refund claims. The aim is to ensure that these businesses comply with GST regulations and that their refund claims are legitimate.
During these audits, IRAS typically conducts the following checks:
(a) Visiting business premises to verify operations and review documents and records.
(b) Interviewing key personnel to gain insights into the business operations and transactions.
(c) Requesting businesses to reassess their past GST returns and disclose any identified errors.
Common Errors Identified
The following are common errors discovered during audits:
- Dormant businesses claiming input tax without any taxable supplies.
- Input tax claims lacking proper documentation, such as tax invoices, import permits, or simplified tax invoices.
- Claims for input tax on disallowed expenses, such as motor car expenses or medical costs.
- Input tax claims on private expenses, such as food and beverage costs for family members or residential utilities and maintenance fees. Businesses should note that input tax cannot be claimed on housing-related expenses, even if the business operates from home, as these are considered personal.
- Zero-rated supplies on exported goods not substantiated by appropriate export documentation.
What You Should Do
IRAS recommend reviewing your records to ensure that your refund claims meet the necessary conditions for input tax claims. Additionally, check for errors similar to those commonly identified in audits. If you find any discrepancies, you should voluntarily disclose them to IRAS to benefit from reduced penalties.
Consequences of Errors
Businesses found to have submitted incorrect returns may face penalties of up to twice the amount of undercharged tax, along with potential fines and imprisonment.
For further assistance, feel free to reach out to WLP.