INLAND REVENUE AUTHORITY OF SINGAPORE

COURSE MATERIAL Q&A question slip GST General Guide for Traders How do I keep Records and Accounts How do I prepare my GST Return? Lecture Notes on GST Class GST Class Feedback Form Slip on IRAS Homepage

CONTENTS Overview Of GST System How GST works Concepts Of GST Scope Of Tax Exports Tax Invoice Purchases Obligations GST F5 & F7 Slide 2 - How GST works - GST concepts - Responsibilities of a GST registered trader - Exports - Purchases and Imports - Record keeping - Obligations - How to complete the GST return

CONTENTS Common Misconceptions Application Exercise Penalties & Recovery Actions Q & A session Feedback Slide 3 - Change of business circumstances - Common misconceptions - Common errors - Application exercise - Q & A session - Feedback

OVERVIEW OF GST SYSTEM What is GST? - tax on domestic consumption - paid whenever customers buy goods or services from GST registered businesses - charged and accounted for at a rate of 7% (with effect from 1 July 2007)

OVERVIEW OF GST SYSTEM Are All Goods And Services Taxable? - All Goods and Services within the GST System are taxable except those which have been specifically exempted by the Act - Main exempt items are financial services and the sale or lease of residential properties

OVERVIEW OF GST SYSTEM Who Collects GST? - For supply of goods or services in Singapore, GST is collected by traders like you who have registered with the Comptroller of GST - For importation of goods, GST is collected by the Singapore Customs at the point of importation

HOW GST WORKS Basic GST Process (Output Tax) GST collected from customers Slide 6 When you take the GST that you collected (that is the Output Tax) minus the GST you have paid (the Input Tax), you arrived at the Net GST amount.

HOW GST WORKS Basic GST Process (Output Tax) (Input Tax) GST collected less GST paid on from customers business purchases Slide 6 When you take the GST that you collected (that is the Output Tax) minus the GST you have paid (the Input Tax), you arrived at the Net GST amount.

HOW GST WORKS Basic GST Process (Output Tax) (Input Tax) GST collected less GST paid on from customers business purchases equals Net GST Slide 6 When you take the GST that you collected (that is the Output Tax) minus the GST you have paid (the Input Tax), you arrived at the Net GST amount.

HOW GST WORKS + - Basic GST Process Net GST Payable to Refundable from + - Payable to Refundable from Comptroller Comptroller Slide 7 If this Net GST amount is a positive figure (meaning that the GST you collected is greater than the GST you have paid out), then the amount is payable to the Comptroller of GST. On the other hand, if the Net GST amount is a negative figure (meaning that the GST you have paid is greater than the GST you have collected, then the Net GST amount is refundable to you from the Comptroller.

HOW GST WORKS SELLING PRICE GST Payable Import Value = $ 5,000 GST paid on import = $350 Manufacturer’s Price = $10,000 Manufacturer GST Collected = $700 GST Amount = $ 700 Less: GST Paid = $350 Selling Price = $10,700 GST Payable = $350 Retailer’s Price = $20,000 GST Collected = $1,400 GST Amount = $ 1,400 Retailer Less: GST Paid = $ 700 Selling Price = $21,400 GST Payable = $ 700 Consumer pays = $21,400 Total GST Paid = $1,400 Consumer Slide 8

CONCEPTS OF GST Scope of Tax Types of Supply When Should You Account for GST? What Is the Value of Supply That Is Subject to GST? Slide 9 - the scope of tax - what transactions attract GST - when to account for GST - what is the amount that is subjected to GST

SCOPE OF TAX Section 8 of GST Act GST will be charged on any supply of goods or services if it is : i) made in Singapore ii) a taxable supply iii) made by taxable person iv) in the course or furtherance of business

SCOPE OF TAX Supply includes all forms of supply done for a consideration. Slide 11 What is supply? Supply includes all forms of supply done for a consideration. Forms of supply can be either goods or services

SCOPE OF TAX MADE IN SINGAPORE? PLACE OF SUPPLY Goods are supplied in Singapore if goods are in Singapore or from Singapore Services are supplied in Singapore if supplier belongs in Singapore

SCOPE OF TAX TAXABLE SUPPLY - A supply of goods or services made in Singapore other than an exempt supply - Consist of standard-rated and zero- rated supplies

SCOPE OF TAX Taxable Person - A person that is GST-registered or is required to be registered for GST under the Act

TYPES OF SUPPLY Non-Taxable Taxable Out-of-Scope Exempt Slide 12 What transactions attract GST? To answer this, we need to look at the various types of supplies. We can categorise the supplies into 2 groups, that is the non-taxable and the taxable supply. As the name suggests, non-taxable supplies are supplies which do not attract GST. This category can be sub-divided into out-of-scope and exempt supplies.

TYPES OF SUPPLY Non-Taxable Taxable Out-of-Scope Exempt Zero-rated (0%) Slide 13 Taxable supply refers to supplies which attract GST. This would include standard rated supply and zero-rated supply. Standard-rated (7%)

NON-TAXABLE SUPPLY Out -of-scope Supply Private Transactions Third Country Sales (Sales outside Singapore) Exempt Supply Sale and Lease of Residential Properties Financial Services

without coming into S’pore Goods are shipped from China to U.S.A. without coming into S’pore Supply is out-of-scope

TAXABLE SUPPLY Zero-rated Supply (0% GST) Export of Goods International Services Standard-rated Supply (7% GST) All Others Eg: Sale of Fixed Assets

TAXABLE SUPPLY SALE OF FIXED ASSETS GST must be charged on the sale of Fixed Assets Eg : Non residential properties, furniture, computers, etc GST to be accounted on Selling Price of Asset

TAXABLE SUPPLY GST is a transaction based tax Need to review all transactions including those not in the normal course of business I would like to stress here that GST is a transaction based tax. Thus, you will need to review your transactions to see if it amounts to a taxable supply. And whether GST needs to be charged accordingly. If you notice here, there is a special treatment on gifts. Let us now take a look at when to account for output tax on gifts.

WHEN SHOULD YOU ACCOUNT FOR GST? GOODS Time of Supply for Goods Goods are removed or made available; Tax invoice issued; or Payment received whichever is the earliest Subject to 14-day rule

WHEN SHOULD YOU ACCOUNT FOR GST? 14-day Rule Tax invoice issued within 14 days when the goods are removed Time of supply is the tax invoice date, provided payment is not made yet

WHEN SHOULD YOU ACCOUNT FOR GST? 14-day Rule Total value of supply - $11,000 Invoice for payment Goods Invoice for Balance received $5,000 Removed Amount $11,000 ($11,000 - $5,000) 01/03/07 31/03/07 14/04/07 Time of supply : ?

WHEN SHOULD YOU ACCOUNT FOR GST? 14-day Rule Total value of supply - $11,000 Invoice for payment Goods Invoice for Balance received $5,000 Removed Amount $11,000 ($11,000 - $5,000) 01/03/07 31/03/07 14/04/07 Time of supply : 01/03/07 ($5,000) 14/04/07 ($6,000)

WHEN SHOULD YOU ACCOUNT FOR GST? SERVICES Time of Supply for Services Services are completed; Tax invoice issued; or Payment received whichever is the earliest Subject to 14-day rule

WHEN SHOULD YOU ACCOUNT FOR GST? 14-day Rule Tax invoice issued within 14 days when the services are completed Time of supply is tax invoice date, provided payment is not made yet

WHAT IS THE VALUE OF SUPPLY THAT IS SUBJECT TO GST? Consideration in money Value + GST = Consideration Eg: $100 (Value) + $7 (GST) = $107

WHAT IS THE VALUE OF SUPPLY THAT IS SUBJECT TO GST? Consideration not in money Value of supply = open market value Trade/cash discount given Value of supply = discounted price

WHAT IS THE VALUE OF SUPPLY THAT IS SUBJECT TO GST? Transactions with related parties Value of supply = open market value Eg: Co. X, a GST-registered business, sold the company’s furniture (market value $5,000) to one of its directors at $800. Value of supply should be $5,000.

WHAT IS THE VALUE OF SUPPLY THAT IS SUBJECT TO GST? Goods for private use Eg: Mr Y, a renovation contractor who is GST registered, uses business goods such as marble tiles for his own home If the cost of materials is $10,000, GST = $10,000 x 7% = $700

EXPORTS Supporting export documents : Zero-rated Evidence of exports required Supporting export documents : Bill of Lading , Airway Bill IESGP permit (previously known as TDB permit). Please note that permit must be taken before the export of goods, otherwise, the Comptroller may not accept it as evidence EXPORTS are zero-rated ss. You nd to maintain export documents as evidence of exports. Examples of such documents include the following: READ SLIDE…

EXPORTS Supporting export documents : invoice to overseas customer purchase order insurance documents packing list or delivery note addressed to overseas customer evidence of payment received READ SLIDE IMPT: In the event if you are unable to satisfy the Comptroller, by way of documentary evidence that you’ve exported the goods  you’ve to std-rate the ss and charge GST accordingly.

TAX INVOICE Importance of Tax Invoice When to issue a Tax Invoice? When not to issue a Tax Invoice? Contents of a Tax Invoice Simplified Tax Invoice READ SLIDE

IMPORTANCE OF TAX INVOICE primary document for input tax claim documentary evidence that GST has been charged on the standard-rated supply For purchases, the tax invoice is a primary document for GST purpose to support input tax claims. Tax Invoice is an impt documentary evidence that GST has been charged on the std-rated ss.

WHEN TO ISSUE A TAX INVOICE? must be issued if making a standard-rated supply to a taxable person within 30 days after time of supply So, When do you issue a tax invoice? Tax Invoice must be issued when you make a std-rated ss. It applies to all std-rated supplies including sale of fixed assets and not just for your normal sales. Tax invoice has to be issued within 30 days from the time of ss.

WHEN NOT TO ISSUE A TAX INVOICE? No need to issue tax invoices for: zero-rated supplies exempt supplies deemed supplies READ SLIDE Deemed Supplies An example of deem ss is free gift where the cost of gift is more than $200 or 3 gifts or more are given to the same person within a period of 3 mths. Note: Although tax invoices need not be issued, you are still required to issue normal commercial invoices, where appropriate.

CONTENTS OF A TAX INVOICE Tax invoice must show : an identifying number invoice date your customer’s name (or trading name) and address description of the goods and services your name, address and GST registration number READ SLIDE

CONTENTS OF A TAX INVOICE the words “tax invoice” total amount payable excluding tax, the rate of GST and the total tax chargeable shown separately total amount payable, including tax breakdown of exempt, zero-rated or other supply, stating separately the gross amount payable in respect of each READ SLIDE Where tax invoice is issued in foreign currency, it must be converted to Sing dollars using the prevailing exchange rate when the supply takes place.

SIMPLIFIED TAX INVOICE When to Issue? amount payable including tax <$1,000 only for standard-rated supplies Particulars name, address and registration number date of issue description of the goods or services total amount payable including GST the words “Price Payable inclusive of GST” READ SLIDE For non-GST registered customers, you can just issue receipts instead of tax invoices.

PURCHASES Claiming of input tax Imports Disallowed Input Tax Claims Conditions for Pre-registration Input Tax Claims READ SLIDE

CLAIMING OF INPUT TAX Tax Invoice Evidence for claiming GST incurred on business purchases Tax invoice addressed to business name ABC Co. Con’t As mentioned earlier, tax invoices acts as the evidence for making I/p tax claims You’re only allowed to claim GST based on tax invoices that are addressed to your biz name. LET ME SHOW YOU SOME CASES WHERE TRADERS HAVE MADE WRONGFUL CLAIMS

CLAIMING OF INPUT TAX Case 1 : Lack of Evidence Tax invoice issued to another person Co. claimed input tax based on tax invoices issued to their related company The input tax was for purchases made by the related co. Input tax claims were disallowed Here, we’ve a case of “Lack of Evidence” Tax invoice is issued to another person (for eg, a related co.) The GST-registered trader claimed i/p tax based on the tax invoice issued to their related co. The i/p tax was for purchases made by the related co. Thus, this i/p tax is disallowed.

CLAIMING OF INPUT TAX Case 2 : Private Expenditure holds valid tax invoices GST trader made claims on redevelopment of residential property expenditure is of a private nature input tax claims were disallowed and trader was compounded Next, we’ve a case where the trader claims GST on private expenditure Trader holds a valid tax invoice But GST is incurred on expenses on the redevelopment of his own residential property Expenditure is of a private nature. Therefore, i/p tax is disallowed and trader was compounded.

IMPORTS Importer - Person who is entitled to claim GST paid on imports GST payment permit - Evidence to support input tax claims We’ll now look at “IMPORTS” The importer will be the one who is able to claim for GST paid upon the importation of gds The GST payment permit or the Cargo Clearance Permit must be maintained as evidence of claims. Further, you will also need to keep other doc like invoice from the overseas suppliers and shipping doc. In order to claim i/p tax, the permit must bear your name as the importer and the gds are imported for your biz purpose.

DISALLOWED INPUT TAX CLAIMS (REG 26 & 27) a) Club Subscription Fee b) Medical and Accident Insurance Premium c) Medical Expenses d) Family Benefits e) Cost and Running Expenses of Motor Cars

CONDITIONS FOR PRE-REGISTRATION INPUT TAX CLAIMS GOODS : Goods supplied to or imported by taxable person NOT supplied or consumed before date of registration Proper stock account is maintained If you incur i/p tax claims prior to your effective date of registration, you must write in to the Comptroller of GST for approval before making the claims. The Conditions for pre-registration claims on Goods are: READ SLIDE

PRE-REGISTRATION CLAIMS GST registration date : 01/06/07 Expenses Incurred : Invoice Date Description Amount Claimable? i) 01/04/07 Purchase of stocks $1,000 Yes ii) 30/04/07 Utilities charges $300 No iii)15/05/07 Office rental $2,500 No iv)01/05/07 Imports which $900 No are sold on 31/05/07

CONDITIONS FOR PRE-REGISTRATION INPUT TAX CLAIMS SERVICES : Services provided to taxable person NOT related to goods supplied or consumed before date of registration NOT supplied to taxable person more than 6 months before date of registration NOT provided by taxable person before date of registration Conditions for pre-registration claim on SERVICES received prior to the effective date of registration are:

PRE-REGISTRATION CLAIMS GST registration date : 01/06/07 Expenses Incurred : Invoice Date Description Amount Claimable? i) 01/11/06 Management fee $1,000 No ii) 30/04/07 Consultancy fee $2,000 Yes iii) 01/04/07 Commission fee $ 500 No for goods sold on 01/05/07

BAD DEBT RELIEF Entitled to claim Bad Debt Relief if you satisfy conditions under Reg. 83 A “Self-Review of Eligibility to claim Bad Debt Relief” Form available from website If you satisfy conditions, claim in Box 7 of current GST return No need to write in for approval

GST Integrated Phone Service Want to check whether we have received your GST return? Request for Statement of account? JUST CALL 1800 356 8633 (24-hour automated voice response system) for all these and more ...

BREAK I’ve now come to the end of the first part of the presentation. You may go for a 15 mins break & pls be seated by __________. If you’ve any query, pls write them down on the paper provided and drop them into the box outside the audi when you go for your break. If you wish to go to the restrooms, you may turn right after leaving the door. If you want a drink, you may take the lift to the Café at 2nd level. Thank you.

Download GST forms and handbooks Find guides on GST form filling! Do you know you can access GST information at IRAS homepage? Come visit us now @ http://www.iras.gov.sg (click ‘Information on Goods & Services Tax’) You can ... Download GST forms and handbooks Find guides on GST form filling! Slide 2 - How GST works - GST concepts - Responsibilities of a GST registered trader - Exports - Purchases and Imports - Record keeping - Obligations - How to complete the GST return

CONTENTS Obligations GST F5 & F7 Common Misconceptions Application Exercise Slide 3 - Change of business circumstances - Common misconceptions - Common errors - Application exercise - Q & A session - Feedback

OBLIGATIONS Record Keeping Filing Of GST F5 Payment Of Tax Registration Change Of Business Circumstances GST - Inclusive Price

RECORD KEEPING What Records To Keep? Business and accounting records Tax invoices and receipts issued/received Credit notes and debit notes Business contract and agreement

RECORD KEEPING What Records To Keep? Tourist refund claim forms Import and export documents (e.g. permit, bill of lading, airway bill) Other documents supporting change in consideration

RECORD KEEPING Examples of Business and Accounting Records: General Ledgers Debtors and Creditors Ledgers Purchase Orders and Delivery Notes Purchase and Sales Books Cash Books and other account books Records of daily takings

RECORD KEEPING Stock records Bank Statements and Pay-in Slips Relevant Business Correspondences GST Accounts Annual Account (e.g. balance sheet, profit & loss statement) Any other documents and records GST guide on ‘How do I keep records and accounts’

RECORD KEEPING Business goods put to non-business use Other Records Business goods put to non-business use Disposal of business assets Supplies of goods and services received Removal of goods from Customs-licensed warehouse

RECORD KEEPING How do you keep records and accounts? no specific guidelines complete and up-to-date figures in GST Returns can be easily verified

RECORD KEEPING From 1 January 2007 Keep records for 7 years Can start to keep only 5 years of records Records relating to accounting periods in 2007 and after Keep records for 7 years - Records relating to accounting periods ending before 2007

RECORD KEEPING Comptroller’s written approval not required to keep records in non-paper form IRAS circular on ‘Wavier of requirement to seek IRAS’ approval for keeping of records in Machine Sensible Form / Imaging System and Electronic Invoicing’. GST guides on ‘Keeping Machine Sensible Records & Electronic Invoicing’ and ‘Keeping of Records in Imaging Systems’

RECORD KEEPING Failure to keep records Guilty of an offence fine < $5,000 and/or imprisonment <6 months 2nd or subsequent conviction fine < $10,000 and/or imprisonment < 3 years

FILING OF GST F5 FILING One GST F5 for One Prescribed Accounting Period YOU MUST NOT USE: Forms issued for Other Periods

FILING OF GST F5 DUE DATE within 1 month after the end of each accounting period Eg : Due date for period 01/10/06 to 31/12/06 is 31/01/2007

FILING OF GST F5 All Tax Returns Must Be Filed By Due Date If No Trading Is Done, a ‘Nil’ Return Is Still Required.

FILING OF GST F5 FAILURE TO FILE RETURN OR MAKE INCOMPLETE RETURN: An Offence Comptroller Can Assess Amount of Tax Due Notice of Assessment (Estimated) Will Be Sent to Trader

PAYMENT OF TAX DUE DATE MODES OF PAYMENT within 1 month after end of each accounting period MODES OF PAYMENT Giro or Cheque Cross all cheques and make them payable to “Comptroller of Goods and Services Tax”

PAYMENT OF TAX If Net Amount Payable <$5, No Payment Is Required If Net Amount Repayable <$5, No Refund Will Be Made The Amount Will Not Be Carried Forward

REGISTRATION Just A Reminder ... Compulsory Registration Voluntary Registration - must remain registered for at least 2 years

Registration GST Certificate With effect from 15 Sep 1999, we no longer issue GST registration certificate and you are not required to display at your business premises

Registration As a GST registered trader, you must print your GST registration number on your tax invoices, simplified tax invoices and serially printed receipts

If You Are Registered As A Sole-Proprietor Registered for GST in your individual name Value of taxable supplies is the aggregate taxable turnover of all your sole-proprietorship businesses Charge GST on supplies made by all your sole-proprietorship businesses

If You Are Registered As A Sole-Proprietor Qn: What if you set up another sole- proprietorship business in future, do you need to register this new business? Ans: No, because you, as the sole-proprietor, are already registered.

If You Are Registered As A Sole-Proprietor You should use the same GST registration number to charge GST with effect from the date of commencement of new business What you must do: Send in ACRA instant information extract of the new business

If You Are Registered As A Partnership Registration is in the name of the respective firms Value of taxable supplies is the aggregate taxable turnover of all partnerships having the same composition of partners

If You Are Registered As A Partnership Charge GST on supplies made by all other partnerships with the same composition of partners Qn: What should you do if you set up another partnership business with the same composition of partners?

If You Are Registered As A Partnership Ans: Send in ACRA instant information extract of the new business and GST F3 immediately. A separate GST registration number will be given for the new business. You are required to charge and account for GST from date of commencement of new business.

CHANGE OF BUSINESS CIRCUMSTANCES Changes involve Business name and address Giro bank account number De-registration Transfer of business as a going concern So what does change of business circumstances mean? Over here, we have listed some of the changes and they include change of your business address and account numbers.

CHANGE OF BUSINESS CIRCUMSTANCES Write in to inform Comptroller within 30 days Do not delay - Refund could be delayed - Transfer of Business, penalties may apply for late notification Please note that you will need to inform IRAS whenever there is a change of business circumstance. As advised here, you have to inform us promptly as your refund may be affected.

CEASE TO MAKE TAXABLE SUPPLIES Notify Comptroller by submitting GST F9 (Application for Cancellation of GST) Within 30 days

CEASE TO MAKE TAXABLE SUPPLIES Once your application is approved, GST F8 (Final Goods and Services Tax Return) will be issued Need to account for deemed output tax - if value of your assets on hand including stock, fixed assets and non-residential properties (for which input tax has been allowed previously) exceeds $10,000

TRANSFER OF BUSINESS AS A GOING CONCERN Eg: Business was converted from a partnership to a private limited Notify the Comptroller 30 days before the date of transfer

GST-INCLUSIVE PRICE Any price displays, advertisements, or quotations in respect of goods or services made to the public should be inclusive of GST Failure to comply with the GST-inclusive price display requirement is an offence -GST legislation requires that a GST-registered business to display, advertise, publish or quote price inclusive of GST. - It is an offence for failure to comply with the above - If your price displays have not been in compliance with the above, you should take immediate steps to rectify your price displays and ensure that they show GST-inclusive prices. - The diagram below is an eg. of GST-inclusive price tag. ABC Co. Pte Ltd $107.00

GST RETURNS How To Complete : 1. GST F5 2. GST F7

HOW TO COMPLETE GST F5 Include: Box 1: Total value of standard-rated supplies (excluding GST Amount) Include: Sale of goods & services (generally local supplies) Sale of business assets Deposits received as part payment Supplies to staff

HOW TO COMPLETE GST F5 (excluding GST Amount) Include: Box 1: Total value of standard-rated supplies (excluding GST Amount) Include: Hire of goods to someone else Gift of goods costing > $200 Deduct: Credit note issued to customers Debit note received from customers

HOW TO COMPLETE GST F5 Box 2: Total value of zero-rated supplies Include: Supplies of goods which are exported Supplies of international services

HOW TO COMPLETE GST F5 Box 3: Total value of exempt supplies Include: Supplies of financial services (4th Schedule) Sale and lease of residential properties

HOW TO COMPLETE GST F5 Box 5: Total value of taxable purchases (excluding GST Amount) Include: Standard-rated purchases Imports Zero-rated purchases (Egs: IDD calls, International Freight Charges, Air Tickets)

HOW TO COMPLETE GST F5 ...cont’d (taxable purchases) Deduct: Debit note issued to suppliers Credit note received from suppliers

HOW TO COMPLETE GST F5 * Not to enter for taxable purchases* Wages & salaries Purchases for private use Purchases from non GST-registered suppliers

HOW TO COMPLETE GST F5 * Not to enter for taxable purchases * Purchases and maintenance of motor cars Family benefits Employee medical & insurance expenses Club subscription & entrance fees

HOW TO COMPLETE GST F5 Box 7 (input tax) Includes: allowable input tax incurred on your taxable purchases refund of GST to tourists bad-debt relief

HOW TO COMPLETE GST F5 Input tax errors Eg: Computational Errors Double claiming of input tax A company used a spreadsheet program to prepare input tax claims The formula in the spreadsheet was wrong resulting in double claiming of input tax Another common error made by traders is double claiming of input tax. This may be made in the same accounting period or in another accounting period. In this instance, the trader had used a spreadsheet with a wrong formula, resulting in double claims of input tax. The error was rectified by the filing of an F7 to correct the errors.

HOW TO COMPLETE GST F5 Please note: To drop off cents for Boxes 1 to 5 & 9 Declare figures in S$, not in foreign currencies All boxes must be completed

HOW TO COMPLETE GST F5 Example: ABC company has the following business transactions for one accounting period: 1) Imports - $20,000 2) Local sale - $10,000 3) Sale of fixed asset - $5,000 4) Local purchase - $8,000 5) Export sales - $50,000

HOW TO COMPLETE GST F5 To which boxes do they belong ? 1) Imports - $20,000 (Box 5) 2) Local sale - $10,000 (Box 1) 3) Sale of fixed asset - $5,000 (Box 1) 4) Local purchase - $8,000 (Box 5) 5) Export sales - $50,000 (Box 2)

HOW TO COMPLETE GST F5 What about Box 6 (output tax) and Box 7 (input tax) ? 1) Imports - $20,000 GST - $1,400 (Box 7) 2) Local sale - $10,000 GST - $700 (Box 6) 3) Fixed asset - $5,000 GST - $350 (Box 6) 4) Local purchases - $8,000 GST - $560 (Box 7) 5) Export sales - $50,000 GST charged at 0%

HOW TO COMPLETE GST F5 Box 1 Standard-rated supplies $15,000 Box 2 Zero-rated supplies $50,000 Box 3 Exempt supplies $0 Box 4 Total of Box 1+2+3 $65,000 Box 5 Taxable purchases $28,000 Box 6 Output tax $1,050.00 Box 7 Input tax $1,960.00 Box 8 Net GST to be claimed $910.00 Box 9 Total imports under MES $0

GST F7 (Disclosure of Errors in GST Return) Purpose: To disclose errors made in the GST F5 But you do not use it for all errors! The following chart will help you determine if you need to file F7(s) for your errors

ERRORS Is the total of all errors > 5% of total supplies? Do the errors involve GST? NO NO Include the errors in the next return NO YES Is the amount of net GST errors > $500? YES YES File in F7

GST F7 (Disclosure of Errors in GST Return) Example 1 Errors involve GST (values of supplies and purchases are correct) Qtr 1: Overdeclared by $300 Qtr 2: Underdeclared by $200 Qtr 3: Overdeclared by $250

GST F7 (Disclosure of Errors in GST Return) Net GST error =+300 - 200 +250 = $350 As the net error is $350 (<$500), no need to file GST F7. Just adjust in Box 7 of current GST F5.

GST F7 (Disclosure of Errors in GST Return) Example 2 Errors do not involve GST Standard-rated supplies error = $200 (output tax is correct) Zero-rated supplies error = $10,000 Taxable purchases error = $500 (input tax is correct)

GST F7 (Disclosure of Errors in GST Return) Total errors = $200 +10,000 + 500 = $10,700 Total supplies = $150,000 Percentage of error to total supplies = $10,700/$150,000 X 100 = 7% (>5%) => File GST F7 for the quarter the error was made

GST F7 (Disclosure of Errors in GST Return) How can I obtain the GST F7? You can: call GST Integrated Phone Service at 1800-356 8633 (Option 4) request through your TaxPortal write in visit us personally at our Taxpayer Services Centre (1st floor, Revenue House) – Letter of Authority required

VOLUNTARY DISCLOSURE Take steps to ensure compliance with GST Legislation File true and complete returns Remember: Always do it right the first time

VOLUNTARY DISCLOSURE Good practice: To review past returns and disclose errors by filing the GST F7 and make the necessary adjustments. Otherwise, heavier penalty will be imposed if the errors are discovered by us.

Submission of incorrect return Omission/understatement of output tax or overstatement of input tax; or Gives any incorrect information Penalty = Amount of tax undercharged

Submission of incorrect return Without reasonable excuse or negligence Penalty = 2 X Amt of tax undercharged; and Fine < $5,000; or Imprisonment < 3 years; or both

COMMON MISCONCEPTIONS

COMMON MISCONCEPTIONS Gifts : need not account GST Trade-in : charge GST on net amount Non-reporting of supplies On-charging of supplies Absorption of GST

COMMON MISCONCEPTIONS Tourist Refund Scheme: Tourist can claim GST based on tax invoices only

Misconception No. 1 Gifts : Need not account GST Conditions for accounting GST on gifts : Incurred GST on purchase of goods Cost of gift > $ 200 or Cost of gift < $ 200, but 3 or more gifts given to the same person within 3 months A lot of traders make the mistake of not charging output tax on gifts. FYI, You will need to charge output tax on gifts if it satisfies the following conditions. Firstly, you must have incurred input tax on the gift, i.e. you have made a purchase from another registered trader. The cost of the gift is > $200. However, if the cost < or = to $200 but 3 or more gifts are given to the same person within 3 months to form a series of gift, then you will be required to account output tax on these gifts.

GIFTS >$200 / SERIES OF GIFTS. GST must be accounted on goods given out as Lucky Draw prizes eg. Dinner & Dance lucky draw prizes Hampers/Gifts to clients Also, please remember that you will need to account output tax for the following items listed here as well.

Misconception No. 2 Trade-in : Charge GST on net amount GST must be accounted on the value of the 2 separate supplies Incorrect to account GST on the net difference only GST is a transaction based tax. Thus, for a trade-in, there are actually 2 supplies here. It is wrong to account GST on the net difference only. Let me illustrate this with an example.

A Year End Sale Not to Be Missed!!! Fridges are going at an unbeatable price of $650 only!! Even more incredible news!! Trade in your old fridge for a Brand New Fridge for only $450!! Unbelievable but true!! So come on down to our stores now !!!

Misconception No. 3 Non-reporting of supplies On-Charging of Supplies Absorption of GST Now we come to the area where traders fail to report their supplies thinking that they need not report them in the first place.

ON-CHARGING OF SUPPLIES Reimbursements vs Disbursements Reimbursements - supply attracts GST Disbursements - do not attract GST We will look at the difference between reimbursement and disbursement. To start off, just bear in mind as we go through the illustrations that reimbursements attract GST, while disbursements do not. The place of supply rule holds. For reimbursements to another local company and a related company, you will need to std-rate as usual; but if the reimbursement is to an overseas company, you may be able to standard-rate it depending on the circumstances.

DISBURSEMENTS OR REIMBURSEMENTS Both involve payments to third parties “on behalf” of another party. GST treatment depends on whether the payment is treated as a disbursement or a reimbursement (rebilling). Disbursement: No GST chargeable Reimbursement: GST chargeable Confusion arises when determining whether a series of transactions results in a reimbursement (within the scope of GST) or a disbursement (outside the scope of GST) is the fact that both words are often used interchangeably, as though they have the same meaning.

GST CONCEPT Section 8(1)of GST Act: “Tax shall be charged on any supply of goods or services made in Singapore where it is a taxable supply in the course or furtherance of any business carried on by him.”

WHAT IS A SUPPLY? Section 10(2)(a) of the GST Act: “…includes all forms of supply, but not anything done otherwise than for a consideration” What is important from a GST perspective is to determine whether any money received amounts to consideration for a supply of goods or services. Where a taxpayer purchases goods and then passes them on to someone else, there has likely been a supply made to him and by him, both of which should be subject to GST if made by registered businesses in Singapore.

DISBURSEMENTS OR REIMBURSEMENTS Contract for gds and svcs is between Co A & 3rd party. Tax Invoice is issued to Co A. Co A is legally responsible to pay 3rd party for the gds & svcs. Onward supply 3rd party (Supplier) Co A Co B (Main Contractor) Contract for goods and services is directly between Co B and 3rd party. Tax invoice is issued to Co B. Co B is legally responsible to pay 3rd party for the goods and services. Reimbursement is in essence 2 supplies. One from supplier to Co A and another from Co A to, say, the main contractor (MC). If Co A seeks reimbursement from the main contractor (MC), GST is chargeable because it is treated as an onward supply from A to the MC. Disbursement: No Supply, no GST chargeable Reimbursement: A supply exists and GST chargeable

ABSORPTION OF GST I wish to absorb the GST on my sales. Do I have to pay any GST to IRAS? GST must be accounted to IRAS on supplies even if you absorb GST. The GST is calculated as follows: GST = 7/107 x selling price Eg : selling price=$100 GST = 7/107 x $100 = $6.54 Another commonly asked question is this:.... Please note that even though you claim that you are absorbing GST, in actual fact, there is still GST accountable to IRAS. The amount is worked out as follows:

Misconception No. 4 Tourist Refund Scheme : Tourist can claim GST based on tax invoices only For tourist who buys goods from you to qualify for refund: - You must participate under Tourist Refund Scheme - You must issue tax-free shopping cheque(s) or refund claim form(s) to tourists so as to enable them to claim GST

TOURIST REFUND SCHEME Global Refund Singapore Pte Ltd : 6225 6238 Premier Tax Free (Singapore) Pte Ltd : 6293 3811 Singapore Retailer Association : 6223 6221

Application Exercise

APPLICATION EXERCISE Answers to Exercise Supplies : 1) Export sales : zero-rated supply <0%> 2) Local sales : standard-rated supply <7%> 3) Disposal of business asset <7%> 4) Interest income : <exempt supply> 5) Value of gift >$200 : Deemed supply <7%> 6) Payment of wages and salaries <Out-of-scope supply>

APPLICATION EXERCISE Answers to Exercise Purchases/ Payment : 7) Taxable purchase <claimable> 8) Taxable purchase <claimable> 9) Non-taxable purchase <not applicable> 10) Not allowable under Regulation 26 <not claimable>

CONTENTS Penalties & Recovery Actions Slide 3 - Change of business circumstances - Common misconceptions - Common errors - Application exercise - Q & A session - Feedback

PENALTIES ON NON / LATE SUBMISSION OF GST F5 $200.00 PER COMPLETED MONTH ( MAXIMUM $10,000 FOR EACH RETURN ) Eg: GST F5 for the quarter ended 31 Dec 2006 due on 31 Jan 2007. GST F5 filed on 14 May 2007 No. of months late = 3 (Feb to Apr) Amount of penalties = $600.00 (3 x $200)

PENALTIES ON NON / LATE SUBMISSION OF GST F5 FINE NOT EXCEEDING $5,000 AND IN DEFAULT OF PAYMENT TO IMPRISONMENT NOT EXCEEDING 6 MONTHS DIRECTOR’S LIABILITY (S74(1) OF THE GST ACT)

USEFUL INFORMATION RE: GST F5 ISSUANCE OF GST F5 NOTIFICATION OF CHANGE OF ADDRESS CONFIRMATION OF RETURN RECEIVED GST HELPLINE: 1800-356 8633

PENALTIES ON NON / LATE PAYMENT OF GST 5 % ON OUTSTANDING TAX ADDITIONAL PENALTY OF 2% OF TAX OUTSTANDING ADDED FOR EACH COMPLETED MONTH UP TO MAXIMUM 50% OF TAX OUTSTANDING

RECOVERY ACTIONS NON-FILING OF GST RETURN ISSUE OF DEFAULT ASSESSMENT IMPOSE PENALTIES ON NON / LATE SUBMISSION OF GST F5 ISSUE SUMMONS TO ATTEND COURT

RECOVERY ACTIONS NON PAYMENT OF TAX IMPOSE PENALTIES ON TAX OUTSTANDING APPOINT OTHER PARTY AS AGENT eg. BANK, TENANT STOP INDIVIDUAL FROM LEAVING THE COUNTRY TAKE LEGAL ACTIONS

Q & A Session

Last update on 17 April 2007