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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.
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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.
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:
GST Reconciliation in Singapore is required for the following processes:
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.
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:
Hence it is important to consider the reconciliation process, if you want to avail the benefits under Singapore Input Tax Credit.
Read our article:What is ITC Rules for Capital Goods under GST?
Varun Hariharan has completed the Legal Practice Course from BPP Law School, Manchester. He has a Masters in Commercial and Corporate Law from the Queen Mary University of London and LLB Honours from Bangor University, UK. He specialises in law related to corporate, artificial intelligence and technology law.
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