GST penalty for small business

I wrote to Today Paper that a small business has to suffer a penalty under the current Goods and Service tax (GST). It has to pay GST on its purchases and is not able to recover the GST from its business customers and on its exports. This has forced many small businesses to "volunteer" to register for GST, even though the amount of GST payable is small. It causes administrative work for IRAS and compliance cost for small businesses to keep records to prepare and submit the quarterly GST returns.

To avoid this problem, I suggested that the the GST law be changed to allow business customers to treat al ltheir purchases as qualifying from GST, including the purchases from the small entities that are exempt from GST.

IRAS has replied that it is not able to offer GST credit for exempt entities who do not pay GST. This reasoning overlooks the fact that the exempt entity has to pay GST on many of its own purchases already. By taking a rigid position, IRAS is creating unproductive and wasteful work for small businesses and itself. Even the business customers have to keep separate records to segregate purchases from exempt and non-exempt suppliers.

IRAS did not contact me to discuss the issue before giving its reply. There is no attempt by IRAS to understand the issue from the point of view of the taxpayer. I hope that our authority can be more open for discussion and dialogue on important issues that affect the cost of doing business in Singapore.

Tan Kin Lian