It was reported recently that Chong Wee Keng, a renovation contractor who owned a sole proprietorship, D’Esprit Design & Renovations, has to pay a total of $504,500.80 in back-dated taxes and penalty for failing to register for Goods and Services Tax (GST). In addition, he has to pay a fine of $4,500.
IRAS runs regular audit programmes across various industries to check the level of tax compliance of the businesses. Using data analytics tools, IRAS is able to cross-check data and detect anomalies. This case was uncovered through one such audit programme.
It is compulsory for businesses with an annual turnover of more than $1 million to register for GST. Businesses should regularly assess if they need to register for GST. If the turnover for the past four quarters or expected turnover for the next 12 months exceeds $1 million, businesses are legally required to notify the Comptroller of GST of their liability to be registered for GST within 30 days of the end of the fourth quarter.
GST-registered businesses can charge GST on their sales and offset this with the GST they pay on their purchases before accounting for the net difference to IRAS.
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.