BOOKS OF ACCOUNTS UNDER GST
GST is a broad based Consumption tax levied on all the supplies of goods and services in Singapore and importation of goods into Singapore.GST is collected by the GST –registered supplier and paid to Comptroller of GST or it in the case of importation of goods it is collected by the Singapore Customs.
Output tax is the GST that is charged and collected by the GST-registered business from the customers and paid to IRAS. GST paid on the purchases and expenses for the business is called Input Tax. The NET GST is the difference between the Output and Input tax. If it is a positive amount, then it is payable to the Government and if it is a negative figure it is refundable.
GST on the Supply of Goods and Services in Singapore
The following conditions need to be satisfied for GST to be chargeable on supply of goods and services.
- The supply must be made in Singapore
- The supply is a taxable supply
- The supply is made by a taxable person; and
- The supply is made in the course or furtherance of any business carried on by the taxable person
Types of Supply
Supplies can be either Standard -rated supply and Zero rated supply. Standard supply refers to all sale of goods and services in Singapore. The GST is charged at 7% for a standard supply. Zero rated supply are classified into two types, one export of goods and the other provision of international Services. Exempt Supplies are supplies that are exempt from GST like the provision of financial services, sale and lease of residential properties and local supply of Investment precious metals. Out of scope supply refers to supplies which are outside the scope of the GST Act. Goods or assets of a GST registered dealer when applied to non business use, will be treated as Deemed supplies.
In order to comply with the Singapore Tax laws, it is mandatory that certain records need to be maintained. The following are the records to be maintained;
- Source documents that stand as proof for a transaction for example, an invoice, receipt, vouchers or anyother relevant documents issued or received from customers or suppliers.
- Accounting ledgers, schedules, journals that show the financial position of the business
- Anyother written evidence relevant to the business.
METHODS OF MAINTAINING BOOKS OF ACCOUNTS UNDER GST
Good record keeping is very essential for a business for the following reasons;
- For making better decisions
- To get a clear picture of the financial position of the business
- Reduces the cost and effort required to file the Income Tax and GST returns.
It is the responsibility of the business owners to ensure that proper records are kept and maintained. It is to be kept to ensure that everytime a Income tax or GST tax return are filed they are supported with relevant documents.
Methods of Maintaining Books of Accounts under GST
Records can be maintained manually and electronically. Manual recording refers to keeping record of the business transactions in a manual form. Examples of manual records are record books, receipts and physical invoices. Business transactions must be supported by source documents such as invoices / receipts from your suppliers, and carbon / duplicate copies of invoices / receipts issued to your customers.Manual records must be maintained in a legible and organized manner.
Records can be kept electronically using a computer and / or accounting software. This includes using Microsoft Office applications, off-the-shelf accounting software, customized accounting software and image systems . Physical copies of source documents need not be kept to substantiate your business transactions for tax purposes if the source documents are kept electronically.
Businesses do not need to seek approval from IRAS to keep their records in an electronic format for tax purposes. However, businesses should ensure that proper internal controls are put in place to ensure the integrity, completeness, accuracy, availability and reliability of the electronic records, including all transactions executed electronically.
Advantages of keeping Books of Accounts under GST
- The advantages of electronic record keeping are
- Quick, efficient and accurate recording of your business transactions
- A complete picture of the financial position of the business
- Easy report generation
- Less storage space
- Facilitating the backing up of records and allowing backup records to be kept in a safer place in the event of theft or natural disasters. Backing up your records will benefit your business. In the event that your business records are missing or destroyed, it is your responsibility to make use of other relevant documents to reproduce your records
Manual record keeping would help for a small business but when a business expands It becomes difficult to maintain the records manually as the volume of the transactions increases. Also electronic record keeping involves less manpower cost. IRAS needs proper records to verify the business transactions. IN the event of failure of proper records being maintained the IRAS may disallow Claims.
Under the Income Tax Act and the GST Act, businesses liable to pay Income Tax and GST are required to keep their records for at least five years for accounting periods ending on or after 01 Jan 2007. The retention period is seven years for accounting periods ending before 01 Jan 2007.
In the case of Companies and limited liability partnerships, records are to be retained for a period of at least 5 years after the date on which the Company or Limited liability partnership has been dissolved or struck off. The responsibility of maintaining the records upon cessation of the business operations will rest with the person who was an officer of the company/LLP immediately before the company/LLP was dissolved. In the case of a liquidation, the responsibility of maintaining the records will rest with the liquidator of the company/LLP.
Apart from Record keeping for Income Tax and GST purposes it is also mandatory that records are to be maintained to meet the statutory requirements.
Consequences of Non- Compliance for Non Maintenance of Books of Accounts under GST
The following are the implications if the compliances are not met;
- IRAS will decide on the revenue earned by the business
- Expense claims, GST input claims may get disallowed
- Penalties may be imposed
Under the Income Tax Act, a maximum fine of $1,000 may be imposed (in default of payment, a jail term of up to six months may be imposed.
Under the GST Act, a maximum fine of $5,000 and / or a jail term of up to six months may be imposed.
In the case of a subsequent conviction, offenders may be fined a maximum of $10,000 and / or jailed for a maximum of three years.
Different Types of Records in Books of Accounts under GST
Sales Invoices / Tax Invoices / Simplified Tax Invoices
As a GST registered Dealer, it is required that a tax invoice must be issued for a transaction, for a zero-rated supply a tax invoice or a sales invoice may be issued.If the value of the supply Is less than $1000 a simplified tax invoice may be issued. Tax invoices should be issued within 30 days from the time of supply.
You may choose to issue a receipt instead of a tax invoice to your non-GST registered customer. Receipts can be used as proof of your income transactions and must be serially numbered, with duplicate copies to be retained.
Cash Register Tapes
A cash register with an internal tape can be used to record all cash sales. When using a cash register, you must ensure that all cash sales are recorded in the cash register and that the internal tape is retained as a source document.
Books to Record Stock / Inventory Taken for Private Consumption
If you take stock / inventory from your business for your own private consumption, the sales price of the stock / inventory taken should be added to your sales
Credit notes are issued to customers for goods which have been sold but later returned, or to give credits to the customers. Transactions such as return of goods due to e.g. incorrect quantity, defective or damaged goods, or incorrect invoicing; or partial / full waiver of charges before the delivery of goods need to be recorded because they reduce the sales figures.
Documents Relating to Imports and Exports
If your business involves the import and export of goods, you are required to keep the import and export permits, subsidiary import certificates and subsidiary export certificates, notes of shipment, parcel despatch notes, courier consignment notes, inward summary reports from AEC, bills of lading, air waybills, IESGP permits, invoices, purchase orders, packing lists, delivery notes, insurance documents and evidence of payments made
Bank statements, which show your transactions with the bank during the month, are vital to your business’ record keeping and should be safely filed in chronological order
Payment Vouchers for Payments Made to Individuals for Services Rendered
You can issue payment vouchers instead of paying cash to individuals for services rendered
Stock / Inventory Lists
Preparing a stock / inventory list will help you keep track of the stock / inventory on hand at the end of each accounting period
A simple record keeping system should be maintained that can be easily understood by all. For a record keeping system to function properly, review the records periodically; update the records as and when transactions are done. Only when a business maintains proper records it will be able to get a clear picture of the financial standing of its business.
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