Preparing for the GST ASK Review
Overview
While the concept of Goods and Services Tax (GST) may seem straightforward, compliance can be quite complex. Through our Assisted Self-help Kit (ASK) Annual Reviews, conducted in line with guidelines from the Inland Revenue Authority of Singapore (IRAS), we’ve consistently identified errors in nearly every case we’ve handled. Some of these compliance mistakes are more prevalent than others and are observed across most of the clients we review. In cases where errors are found, especially in relation to GST (such as incorrect GST paid to or refunded by IRAS), the errors must be quantified for the past five years and reported to IRAS.
Common Errors Found in ASK Reviews
So, what are the most frequent GST errors identified in our reviews? Two of the most common errors are:
- Incorrectly treating supplies as zero-rated when they should be standard-rated
- Improperly claiming GST input tax on prohibited expenses
One of the most frequent and financially impactful GST errors is incorrectly classifying supplies as zero-rated when they should be standard-rated. A typical example is when supplies to overseas customers are mistakenly treated as zero-rated, even though the goods are delivered within Singapore. This can include goods delivered locally by the supplier or collected by freight forwarding agents, which are beyond the company’s control. To qualify for zero-rating, the supplier must be certain that the goods will be exported, and they must maintain the necessary documentation to support the zero-rating. Additionally, local suppliers may wrongfully zero-rate their supplies simply because their own purchases of similar goods were zero-rated, particularly for purchases made on behalf of overseas customers.
Certain services provided to overseas clients may also be incorrectly zero-rated, especially when the services are related to land or goods located in Singapore at the time the services are delivered. These would not meet the criteria for zero-rating.
Another common error involves claiming GST input tax on expenses that are prohibited, such as those related to medical or private car expenses.
In addition to the errors mentioned above, other frequent GST issues include:
- Insufficient documentation to support zero-rating of supplies
- Failing to charge GST on the sale of scraps or by-products
- Not charging GST on the disposal of fixed assets, including motor vehicles
- Failing to report realized exchange gains or losses as exempt supplies
- Incorrectly reporting out-of-scope supplies as zero-rated supplies
These errors can lead to significant financial and non-financial penalties. It is crucial for the person preparing or reviewing GST returns to understand the complexities of GST laws and regulations. Since GST is a transaction-based tax that requires self-assessment (meaning companies must determine the correct GST treatment for each transaction), businesses without adequate resources to ensure accurate GST return preparation should consider engaging a consultant for a review before submission.
How We Can Assist You
WLP offers a comprehensive range of services to help businesses meet their compliance and operational requirements. Contact us today to find out how we can support you in meeting these obligations.