Every GST-registered business in Singapore must know how to file GST returns for their business correctly. Filing GST returns can be a cumbersome process, and if not done correctly, it can lead to penalties and fines. To avoid making these mistakes, businesses might consider engaging in professional services providing GST Assisted Self-help Kit (ASK) reviews to ensure the accuracy of their GST submissions.
In this article, we will discuss some common mistakes businesses make while filing their GST returns and how to avoid them.
Incorrect input tax claims
Input tax is the GST paid on purchases made for business purposes. Businesses are allowed to claim input tax credit on such purchases to offset against the output tax payable. However, businesses need to ensure that they only claim input tax on purchases that are directly related to their business activities.
Input tax cannot be claimed on non-business activities such as private or personal activities, free activities, and activities with non-business objects in the philanthropic, religious, political, patriotic, or public domain. Input tax can only be claimed on goods or services that are used or will be used for business purposes and is directly attributable to taxable supplies.
Late filing of GST returns
Every business or individual registered under GST must file their returns within the first one month after the end of the accounting period covered by the GST return. Late filing of GST returns can result in penalties and fines as the IRAS will impose a penalty of S$200 for late submission once the GST filing deadline is missed. Late submission can result in a fine of up to S$10,000 from IRAS.
Businesses should ensure that they have a proper system in place to file their returns on time. They can also consider outsourcing their GST filing to a professional service provider who can ensure timely and accurate filing of returns.
Failure to account for output tax for gifts
Supplies that are given away for free can be considered gifts. Charges for output tax will be based on the open market value (OMV) of the gift for (a) gifts more than $200 and (b) input tax that was claimed during the purchase or import of the gift.
There are two ways to account for output tax:
1. Have the gift recipient pay the output GST. Recipients can claim input tax credits if they satisfy the requirements for claiming input tax.
2. The business can pay for the output tax themselves.
Failure to account for business assets
Business assets include office equipment, old furniture, and non-residential property. GST must be accounted for when you sell your business assets, transfer, dispose of, or give away your assets for free. Output tax must be accounted for based on the asset’s Open Market Value (OMV) as long as it still holds market value. Unless the asset costs less than $200, the OMV must be accounted for. Businesses are not required to account for output tax if the asset has no market value.
Filing GST returns can be a daunting task. However, businesses can avoid penalties and fines by avoiding the common mistakes discussed above. Businesses might consider outsourcing their GST filing and calculation to a professional service provider who can ensure the timely and accurate filing of returns. By avoiding these common mistakes, businesses can ensure compliance with GST regulations and avoid any unnecessary penalties and fines.
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*The above represent our opinions and views and does not necessarily reflect the position of any entities mentioned.