Large businesses form 2% of the GST taxpayer population but contribute more than 50% of the total GST payable. Large businesses often deal with complex business arrangements, cross-border transactions and have voluminous and high value transactions. Increasingly, businesses are also outsourcing their finance functions to overseas shared service centres or undergoing restructuring exercises. This makes them more vulnerable to making tax errors when their systems and processes fail to capture the business transactions accurately for GST reporting.
Since 2015, IRAS has stepped up GST audits on large businesses. To date, we have conducted audits on 308 large businesses across various industries such as financial services, wholesale, retail, manufacturing, and real estate & construction.
77% of these businesses made GST errors and the total amount of tax and penalties recovered is $73.19 million. The average tax recovery per case is $308,000. The GST errors made by the large businesses are diverse and include the following:
- Fundamental errors (e.g. claiming of blocked input tax, misclassification of supplies);
- Incorrect tax treatment applied for non-trade receipts;
- Omission of sales on receipts captured outside invoicing module;
- Technical errors arising from misapplication of tax law for complex transactions; and
- Failure to comply with GST-specific provisions (e.g. deeming of gift of goods, input tax apportionment).
The majority of the errors arose from inadequate controls in the GST processes such as limited checks on tax classification of sales and purchases, lack of training for staff in GST rules and updates, inadequate oversight of GST documentary requirements and failure to communicate between functional units.
Summary of findings on common errors and control weakness, case stories:
|Types of common errors
|Cross border transactions
|Related party transactions
|GST return preparation
Strengthen controls and improve GST compliance
The audit results indicate the need for large businesses to strengthen their controls in GST-critical systems and processes to effectively manage tax risks and ensure accurate GST reporting. Businesses are advised to consider GST implications for complex or new business arrangements and finance/tax staff should keep abreast of changes in GST rules that may affect the company’s GST reporting obligations.
Large businesses are also encouraged to undertake IRAS’ GST Assisted Compliance Assurance Programme (ACAP) before 31 March 2024 to enjoy a one-time waiver of all penalties on disclosure of GST errors under ACAP, amongst other benefits.
IRAS conducted checks on the price displays of 193 GST registered businesses, primarily in the food catering, fitness and wellness industries. Of these businesses audited, 86 were required to amend their price displays and also paid penalties totaling $37,500 for failure to comply with the requirements under the GST Act.
GST registered businesses must display, advertise, publish or quote (whether verbally or in writing) GST-inclusive prices prominently so that consumers know upfront the final price they have to pay for goods or services.
Among the businesses audited and found with errors, most indicated that their published prices were subject to GST but failed to include the GST amount in the displayed prices, or displayed GST-inclusive prices less prominently than the GST-exclusive prices.
Common errors in price display detected
Check your price displays now to avoid heavy penalties!
To help GST registered businesses comply with price display requirements, the acceptable and non-acceptable price displays are published on the IRAS website. Such examples are also covered under the IRAS e-learning course ‘Overview of GST' available to all businesses.
GST registered businesses that fail to comply with the requirements, even in the first instance, can pay a penalty of up to $5,000. IRAS will not hesitate to prosecute recalcitrant offenders.
To avoid heavy penalties, GST registered businesses (with the exception of businesses in the hotel and food & beverage industries that impose a service charge) should review their price displays immediately to ensure they are in compliance with the law.
Results of Other Compliance Programmes
|Sales of non-residential properties
|General Contractors in the Construction Industry
|Private education Institution
|Businesses under Hand-Carried Export Scheme (HCES)