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, without reasonable excuse or through negligence, collect or attempt to collect an amount:
- as GST when no tax is chargeable under the GST Act (e.g. collecting tax on an exempt supply or zero-rated supply); or
- in excess of what is permitted under the GST Act (e.g. charging tax at a rate higher than the prevailing rate).
If convicted of the offence, you shall pay a penalty and shall be liable to a fine and/or to an imprisonment term.
The Comptroller will consider the facts and circumstances of each case when determining whether the tax is collected without reasonable excuse or through negligence. Generally, the Comptroller will not regard an offence as having been committed if you have made best efforts in establishing the correct GST treatment and pay to the Comptroller the amount collected as GST without demand. For example, the Comptroller will not regard as an offence where GST is wrongly collected as you have treated a compensation payment as consideration received for a supply and you have accounted for the amount collected in your GST return.
Below are also two contrasting scenarios to show whether the Comptroller would regard the collection of tax on a non-taxable transaction as not an offence (Scenario 1 – where there is a reasonable excuse and no negligence) and one that is an offence (Scenario 2 – where there is negligence and/or no reasonable excuse).
Scenario 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.
Scenario 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 clear-cut, well-established and also 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.
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: