Common GST Mistakes in Singapore and How to Avoid Them for Business Success
Singapore’s Goods and Services Tax (GST) regulations are complex with strict compliance requirements that leave little room for error. Mistakes like misreporting taxable supplies, claiming ineligible input tax, or missing filing deadlines result in heavy penalties and legal consequences.
The Inland Revenue Authority of Singapore (IRAS) enforces stringent rules for GST compliance and imposes fines of up to S$10,000, surcharges on tax shortfalls, and criminal liability for serious offenses like tax evasion.
This guide identifies common GST errors businesses make and the corrective measures needed to stay compliant.
What Is GST Compliance and Why Is It Important?
GST in Singapore is a consumption tax levied on the supply of goods, services, and imported goods. Governed by the Goods and Services Tax Act, GST compliance refers to the adherence to statutory requirements related to GST registration, filing, payment, and reporting as mandated by the IRAS.
After GST registration, businesses must levy and collect GST on taxable goods and services (output tax) while also claiming GST business purchases.
GST Registration and Threshold
Currently, the GST rate in Singapore is 9% (effective from January 1, 2024), up from 8% in 2023. The registration threshold is discussed below.
Understanding the Registration Threshold and Its Implications
In Singapore, businesses must register for GST if their taxable turnover exceeds S$1 million within a 12-month period. This threshold for GST rules is determined based on:
Retrospective basis. If a business’s taxable turnover for the past 12 months exceeds S$1 million, it must register for GST within 30 days of crossing the threshold.
Prospective basis. If a business expects its taxable turnover to exceed S$1 million in the next 12 months (e.g., based on confirmed contracts), it must also register within 30 days of becoming aware of this expectation.
Businesses that do not meet the S$1 million threshold can still opt for voluntary GST registration if they make or intend to make taxable supplies. However, once voluntarily registered, they must:
Charge GST on sales and submit regular GST returns
Comply with record-keeping requirements for at least five years, even if they later deregister
Remain registered for at least two years before requesting deregistration
GST Returns and Filing Errors
IRAS mandates that GST-registered businesses file their returns electronically via the myTax Portal within one month after the end of each prescribed accounting period.
Businesses must review all financial records before submission to prevent misstatements, as IRAS audits are increasingly AI-driven and data-verified.
Any errors discovered post-filing should be corrected promptly using the GST F7 form (Disclosure of Errors).
Mistake: Procrastinating on GST Returns
Failing to file GST returns on time can result in:
A fine of up to S$5,000 per return
A 5% penalty on the outstanding GST, with an additional 2% per month (capped at 50%)
Court summons and prosecution in case of persistent non-compliance
GST Calculation and Claim Mistakes
Singapore's GST system operates on an input-output model, where businesses can claim GST on eligible business expenses. However, incorrect claims can lead to tax audits and penalties.
Mistake: Incorrectly Claiming GST on Expenses
Common mistakes related to claiming net GST include:
Claiming GST on non-claimable expenses, such as employee benefits, club memberships, and personal purchases
Lack of proper documentation. Input tax claims must be supported by valid tax invoices, receipts, and proper records for at least five years
Mistakenly claiming GST on exempt or zero-rated supplies. GST cannot be claimed for transactions involving residential property rentals, financial services, or digital tokens
Services Tax and GST Implications
In Singapore, services tax is not a separate levy but falls under the GST framework. GST-registered businesses must charge GST on all taxable services provided in Singapore unless the service qualifies as a zero-rated supply (e.g., international services) or an exempt supply (e.g., financial services).
Businesses providing taxable services must:
Charge GST at the prevailing rate on local service transactions and clearly reflect it in tax invoices
Determine the correct GST treatment for cross-border services, as services provided to overseas clients may be zero-rated under Section 21(3) of the GST Act
Maintain proper GST records and documentation, including contracts, invoices, and proof of service completion, for five years to comply with IRAS audit requirements
GST Record-Keeping and Reconciliation
IRAS requires businesses to maintain complete and accurate GST records for at least five years, even after deregistration.
GST-registered businesses must maintain records for all GST-related transactions, including:
Tax invoices and receipts for all taxable sales
Supplier invoices and receipts for GST input tax claims
Credit and debit notes for adjustments
Export documentation for zero-rated supplies
Mistake: Neglecting Proper Record-Keeping
Neglecting record-keeping is a major compliance risk under Singapore’s GST regulations. Failure to maintain proper records can result in fines of up to S$5,000 per offense under the GST Act.
To prevent tax reporting errors and detect discrepancies in GST reporting, businesses should:
Match GST collected and paid against financial records before submitting GST F5 returns
Identify discrepancies between GST filings and actual invoices to correct errors proactively
Claim input tax credits after ensuring they are supported by valid invoices and meet IRAS eligibility criteria
Use accounting software integrated with myTax Portal to streamline record-keeping and reconciliation
GST Audits and Penalties
IRAS conducts audits triggered by errors, discrepancies, or anomalies in GST returns to ensure businesses comply with GST regulations. Businesses may be subject to desk audits (conducted remotely via document review) or field audits (on-site review of records at the business premises).
Mistake: Dealing With GST Audits Inappropriately
IRAS informs businesses about the audit and requests specific documents, such as GST registration, tax invoices, ledgers, bank statements, and contracts. Businesses usually have three to four weeks to submit relevant supporting documents.
Submitted documents are then reviewed and IRAS issues a Letter of Findings detailing any errors and the necessary corrective actions. Businesses must rectify mistakes by filing Voluntary Disclosure (if applicable) or making tax adjustments.
Singapore enforces strict penalties for non-compliance to GST obligations, classified based on the nature and severity of the offense:
Late submission penalties. $200 for every late month or part thereof, up to a maximum of $10,000 per return. If the return remains unpaid, IRAS may issue a Demand Note with a 5% late payment penalty.
Errors in GST returns (without intent to evade tax). A penalty of 5% on the underpaid tax. If errors are not voluntarily disclosed and discovered through an audit, IRAS may impose a 100% surcharge on the tax shortfall.
Serious offenses (with intent to evade tax). A penalty of up to 400% of the tax undercharged, plus a fine of up to $10,000 and/or imprisonment of up to seven years under Section 62 of the GST Act.
Failure to register for GST (when required). Businesses that exceed the $1 million taxable turnover threshold but fail to register for GST can be fined up to $10,000 and subjected to a 10% penalty on GST due.
GST on Imported and Exported Goods/Services
Singapore imposes GST on imported goods and services to ensure tax neutrality between local and overseas suppliers.
Import GST at 9% (2024 rate) is levied at the point of importation unless the importer qualifies for GST suspension under schemes like the Major Exporter Scheme (MES) or the Import GST Deferment Scheme (IGDS). The Overseas Vendor Registration (OVR) regime requires overseas suppliers selling digital services to Singaporean consumers to register for GST if their annual taxable turnover exceeds S$100,000.
Businesses that are not fully GST-taxable (e.g., those making exempt supplies like financial services or residential property rentals) must account for GST on imported services under the Reverse Charge mechanism.
Exports are zero-rated (0% GST) under Section 21(3) of the GST Act. To qualify for zero-rating, businesses must provide export documentation (e.g., Bill of Lading, Airway Bill, or Customs export permit) proving that goods have left Singapore.
Not all export services qualify for zero-rating; businesses must ensure their services meet the criteria outlined in Section 21(3) of the GST Act.
Examples of zero-rated services include services supplied to overseas customers where the benefit is wholly outside Singapore and international transport services.
Mistake: Overlooking the Intricacies of Import and Export
Businesses should not assume all overseas transactions are automatically exempt or zero-rated.
Failure to maintain accurate records can result in rejected input tax claims on imports and incorrect zero-rating of exports.
Businesses that incorrectly apply GST rules on imports/exports may be required to pay the undercharged GST plus interest.
If a business fails to provide proper export documentation, IRAS can deem the supply as a standard-rated local sale and demand 9% GST on the transaction, plus penalties.
Non-compliant businesses may face delays in goods clearance, and Singapore Customs may seize imported/exported goods for mis-declared GST values.
A Recap of Common GST Mistakes to Avoid in Singapore
Understanding Singapore’s GST is essential for both local and foreign businesses to ensure compliance and avoid costly penalties. The most common GST errors include:
Not filing GST returns via the myTax Portal within one month after the accounting period ends. This leads to fines of up to S$5,000 per return, a 5% late penalty, and compounded penalties of 2% per month (capped at 50%).
Incorrectly claiming GST on non-claimable expenses (e.g., employee benefits, personal purchases) or exempt supplies (e.g., financial services, residential property rentals).
Not maintaining five years of GST records, including tax invoices, supplier receipts, and export documentation.
Discrepancies in GST filing. Errors without fraudulent intent incur a 5% penalty on underpaid tax, while tax evasion can lead to 300% tax penalties, fines up to S$10,000, and imprisonment of up to seven years.
Incorrect zero-rating of exports or non-compliance to Major Exporter Scheme and Import GST Deferment Scheme.
Tax professionals in Singapore make GST compliance easier and help you avoid these costly mistakes. If you need assistance with GST registration, filing, or compliance, talk to a tax advisor at Piloto Asia today.