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Do I Need to Register for GST or Not?
Posted on Apr 12, 2016

When it comes to Goods and Services Tax (GST) compliance, there are many practical issues that businesses need to consider. Amongst these is determining whether your business is liable for GST registration. In general, you must register your business for GST if your taxable supplies for the past 12 months exceed $1 million, or if your taxable supplies for the next 12 months are expected to exceed $1 million. Non-compliance can easily escalate to hefty fines and penalties by the Inland Revenue Authority of Singapore (IRAS).
 
Taxable supplies refer to supplies of goods and services, including standard-rated and zero-rated supplies, made in Singapore other than exempt supplies and out-of-scope supplies.

Standard-rated supplies are taxable supplies of goods or services supplied in Singapore, such as sale of goods locally or providing consulting services in Singapore.

Zero-rated supplies are taxable supplies but liable to GST at 0%. Such supplies include export of goods and international services such as the provision of international freight forwarding.

Exempt supplies include the sale and lease of empty residential properties and prescribed financial services, such as interest income from banks/intercompany loans or interest income and realised foreign exchange gains.

Out-of-scope supplies include third country sales, e.g. sale of goods directly from China to USA where the goods do not enter Singapore.

Take the case of a renovation contractor named by IRAS (read IRAS’ report here) in October 2014. The sole proprietor was liable to register for GST by October 2006, but had not done so, and was ordered to pay $458,637.09 of GST that he did not account for between 1 December 2006 and 31 December 2010. On top of that, he had to pay a penalty of $45,863.71, equivalent to 10% of the amount of the tax due. He was also fined $4,500.

According to IRAS, close to 400 potential GST registrants – including sole proprietors and commission agents such as insurance agents and property agents - have been reviewed since 2007. IRAS has clawed back close to $30 million in taxes with penalties amounting to half a million from those who did not comply.

Failure to aggregate income of all sole proprietor businesses
Many sole proprietors mistakenly believe that all their sole proprietor businesses registered under different trading names are separate legal entities. Thus, they do not aggregate the taxable turnover for all the businesses and other business activities (e.g. commission received) in determining their GST registration liability.

Under the law, all businesses under a sole proprietor’s name are considered as a single entity. This means a sole proprietor is liable to register for GST if the total taxable turnover of all his businesses and income from all his trade and professions exceeds $1 million per annum.

Failure to take into account professional fees and commissions
Insurance agents and property agents often are not aware of their liability to register for GST, as many of them have not registered any business with the Accounting & Corporate Regulatory Authority. They might not be aware that fees and commission they receive should be taken into account in determining their liability for GST registration.

Services provided in the course of any trade, profession or vocation, such as insurance or property agency services, are considered as taxable supplies for GST purposes. Thus, if you are an insurance agent or property agent drawing such fees and commissions exceeding $1 million annually, you are liable to register for GST.

If you’re making these mistakes and do not register for GST in time, there will be serious consequences. IRAS will back-date your registration date, and you will have to account for GST on past sales starting from the effective date, even if you did not collect any GST from your customers. You may also face a fine of up to $10,000 and a penalty equivalent to 10% of the GST due.

Bear in mind that you have to register for GST within 30 days of the following:
  • The end of the quarter where you are liable for GST registration under the retrospective view;
    Taxable turnover exceeds $1 million for 4 quartersDue date to register for GST
    1 January to 31 December 30 January
    1 April to 31 March 30 April
    1 July to 30 June 30 July
    1 October to 30 September 30 October
  • The day you are liable for GST registration under the prospective view. For instance, if you entered into a sales agreement on 1 January 2016 and the value of the contract exceeds $1million, you will have to apply for GST registration by 31 January 2016.
Once you've registered for GST, it is important that you ensure accurate reporting of GST to avoid costly penalties. This include keeping yourself abreast of GST developments and ensuring you or anyone you engage to report GST on your behalf has adequate GST knowledge.