On 2 June 2014, IRAS updated its website to provide a response to the letter “Payment woes of cash-strapped GST-registered businesses” by Mr Manmohan Singh published in the Straits Times’ forum on 28 May 2014.
Mr Singh asked whether a GST-registered business can enforce payment of the tax from its customers since it is merely collecting the tax on behalf of the Government.
IRAS’ response is that GST has to be included in the price that a GST-registered business charges for its goods or services. If a customer refuses to make payment, the business will take actions to recover the debt based on its contractual agreements.
GST-registered businesses are required to submit their returns and pay GST to IRAS one month after the end of the accounting period. IRAS will send a demand note with 5% penalty to a GST-registered business if it fails to pay GST after the due date. It then usually would have another month to pay up the outstanding tax.
IRAS will only appoint the bank as an agent if the business does not respond to our notices and reminders. For businesses that come forward to explain their circumstances, IRAS are prepared to work out alternative payment arrangements with them.
IRAS has also some measures in place to help GST-registered businesses with their cash flow. If a business has taken recovery actions on the debt but is unable to recover the money after 12 months, it may apply for a bad debt relief for return of the GST previously accounted and paid for.
Small businesses with less than $1 million annual sales may consider applying for the Cash Accounting Scheme if they have frequent cash transactions. This scheme allows approved businesses to account for GST to IRAS only after receiving payment from their customers.
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