All you need to know about GST Reconciliation in Singapore

Varun Hariharan

26 Oct, 2020

Singapore is one of the largest financial centres in the world. Due to this, international businesses are booming. Companies that set up business centres in Singapore are required to register with the Inland Revenue Authority of Singapore (IRAS), to file GST and other forms of tax returns.

Domestic companies and international companies present in Singapore are required to register with the authority for filing GST return. It is mandatory to file GST return in Singapore if specific criterion has been met as per the required authority.

GST is an abbreviation for goods and services tax, which is an indirect tax levied on the goods manufactured and services rendered in Singapore. GST is levied on any form of goods which are also imported in Singapore. Hence, a company which imports goods and products into Singapore would have to pay GST.

The rate of GST charged in Singapore stands at 7%. So basically, the GST would be levied on the sale price of goods manufactured and other services rendered. Once this is levied, then the amount of GST collected would be provided to the relevant authority.

What is GST Reconciliation?

To understand the meaning of GST reconciliation, it is first important to know the meaning of reconciliation. Reconciliation is a term which is generally used in accounting processes, to compare and check records and other documents if they match.

Generally, reconciliation is carried out by a business entity to understand, if there are any forms of mismatches in the figures provided by the company and compare them to a set of records. Whenever reconciliation is carried out, then, there has to be a record to match the figures with the reconciled amount.

Hence if we apply the above meaning to GST, then GST reconciliation can be understood as matching records and data. In this process, the data provided by the supplier of goods and services is analysed and matched to the data of the receiver of goods and services. This process also is important in matching information of the receipts to the invoices charged. Once the process of reconciliation is carried out, then it would be simple to provide correct information to the IRAS to avoid any form of penalties.

Hence, if there are any mismatches in the records of GST, then reconciliation would help in correcting the errors.

Why is GST Reconciliation carried out?

GST reconciliation is carried out to provide ease of records to the authority.

Hence GST reconciliation is carried out in Singapore for the following reasons:

• Reconciliation is the process of matching data which is provided by the supplier to the information/data received by the end-user of the goods.
• All receipts and invoices are matched during the period of the accounting term during the reconciliation process.
• When reconciliation is carried out, the business can ensure that no form of receivables and revenue obtained from sales and purchases are wrongly reported to the IRAS^[1].
• GST reconciliation is carried out to ensure that there is no form of confusion or mismatches caused when filing GST return to the relevant authority.
• Through this process, it makes it simple for the entity and the authority to match GST returns properly.
• Reconciliation is carried out so that no forms of wrong inputs are provided to the authority.
• Through the process of GST reconciliation, vendors and sellers can get specific benefits such as claiming some form of the input tax credit from the IRAS when filing GST return.
• This process is carried out so that the vendor can claim some form of the input tax credit from the IRAS.
• When invoices are not reconciled regularly, then securing ITC (Input Tax Credit) would not be possible for the vendor. Hence to claim the benefit of the input tax credit, it is important to reconcile GST regularly.
• Annual returns have to be differentiated from GST returns. For example, GST return is compulsory for a business which satisfies certain criteria. These returns have to be filed quarterly, i.e. every three months. Annual returns have to also be filed by the company regularly. Hence, when considering GST reconciliation, it is important to note the differences between annual returns and GST returns.

Is it Mandatory to Carry out GST Reconciliation?

• In Singapore, the primary regulatory authority for GST registration and filing GST returns is the Inland Revenue Authority of Singapore (IRAS). It is mandatory to carry out either the voluntary GST registration or the compulsory GST registration in Singapore.
• Hence, it is mandatory to register and file GST returns. This would directly make the process of GST reconciliation mandatory for the end-user. GST reconciliation must be carried out so that the authority imposes no forms of penalties or late fees.
• Apart from this, the GST Taxpayer must pay proper returns to the IRAS.  Reconciliation is carried out by businesses mainly to reconcile certain amount of information or data to that of receipts to avoid any form of omissions or confusions.
• Apart from this, GST reconciliation is required to be carried out in most tax jurisdictions to avoid any form of discrepancies or penalties.
• When this process is carried out, the amount of supply of goods or services provided is matched to the number of purchases made. Usually, when reconciliation is carried out, the selling price is considered and matched to the initial price of the goods or the services.
• Reconciliation takes time as the parties have to liaise with different authorities to reconcile amounts. Hence, the parties must pay importance to this process.

Where is GST reconciliation required?

GST Reconciliation in Singapore is required for the following processes:

• Data Error and any form of Mismatches
• Non- Tallying of Invoices
• Difference in the HSN Code
• Difference in the Description
• Internal Records
• External Records

Data Error and any form of Mismatches- If there are any differences in the data entered in invoices between the seller and taxpayer. Such differences in information would lead to carrying out the process of reconciliation.

Non-Tallying of Invoices- If the information or amounts written or inputted in invoices are different, then reconciliation can be used to rectify such information.

Difference in the HSN Code– If there is a difference in the HSN code, then reconciliation can be carried out.

Internal Records- One of the main reasons for reconciliation is mismatches or errors in internal records of the company. If the supplier of goods provides the invoices, and such information is not entered correctly in the internal records, then it would lead to issues.

External Records- The process of GST reconciliation can also be considered if external records show no information. For instance, the records of the GST invoice and data is present in the internal records of the firm or entity. However, this information is not present with the supplier or seller, then GST reconciliation can be utilised.

What would happen if GST Reconciliation is not carried out?

It is mandatory to carry out the process of reconciliation.

If a business does not regularly carry out the process of reconciliation, then the following instances can occur:

• Not Conducting Reconciliation process frequently will lead to mismatches and errors in the computation of GST.
• It would lead to delay in carrying out the filing of GST return with the IRAS.
• Errors and Omission will drastically reduce the reputation of the company with the IRAS.
• It may also cause penalties.
• Apart from this, not carrying out the process of GST reconciliation frequently would not allow the vendor to claim the special benefit of input tax credit.

Hence it is important to consider the reconciliation process, if you want to avail the benefits under Singapore Input Tax Credit.

Conclusion

Read our article:What is ITC Rules for Capital Goods under GST?