The annual GST check-in

In this piece, we list and detail a few key matters that businesses should consider now, and over the next few months, and what should be done to remain GST compliant. Remember that voluntary disclosure of errors may allow you to avoid penalties or be subject to reduced penalties – but they must be made within the stipulated timeframe.

January 2022 considerations

With 2021 behind us, there are several considerations that businesses should consider as part of their year-end processes to ensure that they remain GST compliant. We list and detail these in this January 2022 considerations section.

Do you still meet the GST exemption conditions?

Businesses that were granted an exemption from registration by the Inland Revenue Authority of Singapore (IRAS), are required to ensure they continue to meet the conditions for exemption by 31 January each year.

Do your quarterly GST returns and financial records reconcile?

The IRAS frequently uses data from various sources at their disposal to identify cases of non-compliance.

Whilst there may be genuine reasons why the supplies value declared in your GST returns and revenue shown in your financial statements do not reconcile (e.g. out-of-scope supplies, non-operating income, timing differences etc) it is prudent and a good risk mitigation practice to prepare quarterly, or at least an annual reconciliation.

For businesses with a 31 December year-end, January is the best time to perform annual reconciliations and give senior management comfort that there have not been any occurrences of under- or over-reporting during the year.

GST year-end considerations

Not many businesses are aware that their GST year-end is not always the same as their financial year-end.

For businesses whose GST returns follow a calendar quarter stagger (i.e. 31 March, 30 June, 30 September, and 31 December), its GST year-end follows the Government’s financial year end of 31 March.

Other businesses’ GST year-ends are deferred to April or May to align with its quarterly GST filling periods.

The GST year-end is also an opportune moment for businesses to reflect on the ‘year gone by’ from a GST compliance and risk management perspective. In addition, 2021 is the first GST year-end since the implementation of the Reverse Charge provisions.

Do you need to make a longer period adjustment?

Businesses that made exempt supplies in the year that did not meet the partial exempt de-minimis test may have had to perform a longer period adjustment.

A longer period adjustment revises the amount of input tax the business was entitled to claim in its last four quarterly GST returns (e.g. April to March) and could result in additional input tax claims.

From 2022 onwards, businesses performing a longer period adjustment need to consider whether they were also required to account for GST under the reverse charge on imported services (see next section for more).

Are you affected by the reverse charge?

Since 1 January 2020, businesses that were not entitled to full input tax recovery had to self-account for GST under the reverse charge as if they were the supplier. They were, however, entitled to claim the output tax as input tax subject to their GST recovery rate.

The IRAS implemented an administrative concession which allowed businesses (via completion of a self-declaration form) to account for the reverse charge on an annual basis, rather than in the quarterly GST returns.

The year ahead

Whilst the areas raised hereto relate to historic risk areas, this is also a perfect opportunity to consider future risk and compliance mitigation options.

Making use of reverse charge administrative concessions?

Businesses that applied for, and benefitted from, one of the administrative concessions in the past GST year must renew their self-declaration to continue enjoying the benefits in 2022. If you did not know about the administrative concession, you still have time to apply for it for year-ended 2022.

Is your internal risk management and control framework sufficiently robust?

There is a growing trend for tax authorities across the globe (including the IRAS) to move away from output-based audits to internal control and risk framework-based reviews.

The IRAS has already made a major step in this direction with the introduction and expansion of the enhanced Assisted Compliance Assurance Program (ACAP).

Have you considered the strength and robustness of your existing transaction processing and GST reporting process? Could manual processes result in human error and increased risk of non-compliance?

GST is a transaction-based tax and therefore, even a small deficiency or one-off manual error in your transaction processing and/or GST reporting process can multiple many times over and result in a significant impact in the values declared in your GST returns submitted to the IRAS.

A strong internal control framework, which includes a regular review process, is essential for businesses that wish to remain GST compliant.