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GST registered businesses are responsible for the proper accounting of GST. Where they make errors in reporting the correct GST amount to IRAS, they may face penalties, particularly when errors are uncovered during IRAS audits. However, you can avoid such costly penalties if you exercise greater care when filing your GST returns. You should also periodically review your past GST returns to uncover and rectify errors in a timely manner. To help you fulfill your tax obligations, we have compiled a list of common GST errors that businesses should seek to avoid.
Inland Revenue Authority of Singapore | 55 Newton Road Revenue House Singapore 307987 | phone 1800 3568633 | fax 6351 3553
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Trade-in Transactions
A trade-in transaction is treated as 2 separate supplies for GST purposes. You must charge GST on the full selling price of the goods you traded in and not on the net difference only.
Recovery of expenses
When you recover the expenses from another party (e.g. your subsidiary or customer), whether GST needs to be charged on the re-billed amount will depend on whether the recovery of expenses is a reimbursement or disbursement. Disbursement is not subject to GST. You do not charge GST on a disbursement i.e. where you are merely recovering costs from having made payment on behalf of a third party. The goods or services you have paid for was acquired directly by the third party in his own name. Your recovery of costs from a third party cannot be treated as disbursement if: You acquire the goods or services and incur the cost as a principal. This occurs when: - you contract for the supply of goods or services in your own name or capacity; - you are legally obliged to pay the supplier of the service or goods; AND - you receive the goods or services or the benefits of the goods or services directly from the supplier. The goods or services are used or consumed by you in the course of making your supply to a third party You must charge and account for GST on the recovery of expenses if it does not qualify as a disbursement.
Inland Revenue Authority of Singapore | 55 Newton Road Revenue House Singapore 307987 | phone 1800 3568633 | fax 6351 3553
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Zero-rated Supplies
Not all services provided to overseas customers or export of goods can be zerorated (i.e. charge 0% GST). You may zero-rate your supply only if your: Services qualify as international services under Section 21(3) of the GST Act. - See www.iras.gov.sg > GST > For GST-registered businesses > Charge & Claim GST > When to charge 0% GST > Providing international services Goods are exported or hand-carried out of Singapore and evidenced by the required documents within 60 days from the time of supply.
Exempt Supplies
The two main types of exempt supplies are the provision of financial services and the sale / lease of residential properties. Common errors of exempt supplies are: Wrongly including the value of unrealised exchange gain or loss. Only the net realised exchange gain or loss needs to be reported. Wrongly reporting interest received from an overseas entity (e.g. overseas bank) as exempt supply. Such interest should be a zero-rated supply as it qualifies as an international service.
Inland Revenue Authority of Singapore | 55 Newton Road Revenue House Singapore 307987 | phone 1800 3568633 | fax 6351 3553
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www.iras.gov.sg
Inland Revenue Authority of Singapore | 55 Newton Road Revenue House Singapore 307987 | phone 1800 3568633 | fax 6351 3553
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