A manufacturer of metal doors and windows, Creative Engineering Works Pte Ltd (“CEWPL”), has to pay about $170,000 in taxes and penalty for failing to inform the Comptroller of Goods and Services Tax (“GST”) that it needed to register for GST. The court also ordered CEWPL to pay a fine of $5,500. CEWPL is the second company to be charged in court this year for such offences.

Businesses with over $1 million turnover must register for GST

Under the law, businesses with annual sales turnover exceeding $1 million must register for GST. A GST-registered business is required to charge GST on its sales. It can offset this with the GST it pays on its purchases before accounting for the net difference to IRAS.

Businesses should regularly assess if they need to register for GST. They must register for GST if their turnover for the past four quarters or expected turnover for the next 12 months exceeds $1 million. This should be done within 30 days of the date their 12-monthly turnover crosses the $1 million mark.

How the offence was committed

IRAS’ investigations revealed that CEWPL’s taxable turnover for the four quarters ending 30 Jun 2005, 30 Sept 2005, 31 Dec 2005 and 31 Mar 2006 exceeded the $1 million threshold. However, it failed to inform the Comptroller of GST of its liability to register for GST within 30 days of the end of the last quarter, i.e. 30 Apr 2006.

Furthermore, CEWPL deliberately cancelled genuine invoices amounting to $599,389.77 to avoid registering for GST.

For its wilful actions, CEWPL has to pay $154,535.16 of GST that it did not account for between 1 Jun 2006 and 31 Dec 2008. Beyond this, CEPWL has to pay an additional penalty equal to 10% of the amount of the tax due. This amounted to $15,453.53. CEWPL was also fined $5,500 by the Court.

Penalties for Failure to Register for GST

IRAS reminds businesses to follow GST registration rules by closely monitoring their taxable turnover at the end of each quarter and ensuring that they promptly register for GST when their turnover exceeds $1 million per year. We conduct regular audits to identify businesses which fail to register for GST despite needing to do so.

Businesses failing to register for GST even though they are required to do so by law can be fined up to $10,000 and pay a penalty equal to 10% of the tax due from the date on which the business is required to register for GST. The business’ effective date of GST registration will be back-dated to the day that its liability to register arose. Consequently, the business will have to pay the outstanding GST on all its past transactions since the effective date of registration, even if this amount was not collected from its customers.

Reporting of Malpractices

Businesses or individuals are encouraged to immediately disclose any past tax mistakes. IRAS will treat such disclosures as mitigating factors when considering action to be taken. Those who wish to disclose past mistakes, reveal evaded taxes, or report malpractices that might indicate tax evasion, can write to:

Inland Revenue Authority of Singapore
Investigation & Forensics Division
55 Newton Road, Revenue House
Singapore 307987
Email: [email protected]

Cash Rewards for Informant

A reward of up to 15% of the tax recovered, capped at $100,000, would be given to informants if the information and/or documents provided lead to a recovery of tax that would have otherwise been lost. IRAS would ensure that the identities of informants are kept strictly secret and confidential.