4 November 2016
In the last two years, the Inland Revenue Authority of Singapore (IRAS)’s audits of GST compliance programmes were focused on the logistics industry and as well as on the sale of non-residential properties by GST-registered businesses. The audit findings are summarised as follows:
Out of the audits conducted on 289 businesses in the logistic sector, 75% of these businesses made GST errors related to incorrect GST treatment of their diverse services and incorrect input tax claims i.e.:
- Erroneous zero-rated transportation services to local customers
- Erroneous zero-rated storage services to local customers
- Erroneous zero-rated storage services to overseas customers with no certainty of when the goods will be exported
- Wrongful claims of input tax or used Major Exporter Scheme (MES) on imported goods belonging to another local person
- Non-compliance with GST requirements as a GST agent under section 33(2) or section 33A
Sale of non-residential properties
Out of the 284 GST-registered businesses that sold non-residential properties during the period 1 October 2013 to 31 December 2015, 55 businesses were found to have failed to charge and/or account for GST collected on the sale of non-residential properties in their GST returns. This was largely due to an inadequate understanding of the GST rules on the following property transactions:
- Sales of properties owned by sole-proprietors / partnerships
- Transfers of properties not involving any monetary consideration
- Sales of properties in-satisfaction of debt by liquidators/receivers
Some other common mistakes made include late accounting of GST on the receipt of booking fee/option money, no tax invoice for the option money/deposit received and over-claiming of input tax.
A total of $12.7 million in taxes and penalties had been recovered from these audits.
In 2016 and 2017, IRAS will be focusing their audits on large businesses with more complex business arrangements, as well as on businesses’ display of GST-inclusive prices.
GST errors or omissions discovered through IRAS’s audits will attract penalties of up to two times the tax underpaid and a 5% late payment penalty. Penalties may be reduced for voluntary disclosures which meet the qualifying conditions of IRAS’ Voluntary Disclosure Programme.
For further details, please refer to the IRAS’s website.