Wrongful Collection of GST by GST-registered persons

 

As a GST-registered person, you are authorised to collect GST from your customers on behalf of the government. However, it is an offence if you collect or attempt to collect GST, without reasonable excuse or through negligence, when no tax is chargeable under the GST Act or when you collect or attempt to collect an amount in excess of what is permitted under the Act. If convicted of the offence, you shall pay a penalty and shall be liable to a fine and/or to an imprisonment term.

Generally, if you voluntarily account for and pay to the Comptroller the GST wrongfully collected in a timely manner, you will not be penalized.

Examples of wrongful collection of GST include:

  • Charging GST at 7% on a zero-rated supply
  • Charging GST on an exempt supply or an out-of-scope supply
  • Charging GST at a rate higher than the prevailing rate of 7%
  • Charging GST on a transaction that does not constitute a supply (e.g. late payment penalty or compensation)
  • Charging GST on a supply made by another person

 

For information on when you should standard-rate or zero-rate your supply and when you should not charge GST, please refer to the following:

The Comptroller will take into consideration the facts and circumstances of each case in determining whether the wrongful collection of GST was committed without reasonable excuse or through negligence. Where an incorrect GST treatment is applied to a complex transaction and the correct GST treatment is not publicly available, or there are unforeseeable circumstances which led to the wrongful GST collection, the Comptroller may regard the wrongful collection as not committed through negligence or without reasonable excuse. Below are two examples of what the Comptroller would regard as a wrongful collection of GST committed with a reasonable excuse and without negligence (Example 1) and one that is committed without reasonable excuse or through negligence (Example 2).

Example 1 – where there is a reasonable excuse and no negligence

DEF Pte Ltd (“DEF”) is in the business of selling perfumes. It organised a charity run to raise funds for children with disadvantaged backgrounds in Singapore. DEF received cash sponsorship from one of its suppliers, GG Pte Ltd (“GG”), to help defray the costs of organising the event. DEF did not provide any form of benefit to GG in return for the sponsorship. However, DEF wrongly charged GST to GG on the sponsorship received under the misconception that it had to charge GST on monies received from another local company. It was the first time DEF held a charity event. DEF had reported the GST charged in its GST return for the period in which it received the cash from GG.

As it was the first time that DEF held a charity event for which it received sponsorship and DEF had accounted for the GST wrongfully charged in its return, the Comptroller would give DEF the benefit of the doubt and not penalise DEF for the wrongful act.

Example 2 – where there is negligence and/or no reasonable excuse

XYZ Pte Ltd (“XYZ”) is a property developer in Singapore. XYZ wrongly charged GST on the sale of a residential property situated in Singapore. The error arose as the Finance staff overlooked the need to check that the correct tax coding was applied when XYZ issued the tax invoice. XYZ had reported the sale as an exempt supply in its GST return.

 

The GST treatment of the sale of residential properties in Singapore is widely publicised since the implementation of GST. As XYZ is a GST-registered property developer, it is expected to know that the sale ought to be exempt and should have complied with the GST treatment. In addition, XYZ had reported the sale as an exempt supply and did not account for the GST charged on the sale.

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