Zero GST Schemes

Zero GST Schemes | Bestar

Singapore GST Schemes Explained

Zero GST Schemes

In Singapore, "Zero GST Schemes" generally refer to specific programs designed to suspend or zero-rate the Goods and Services Tax (GST) on certain transactions, primarily to facilitate trade and improve cash flow for businesses. The most prominent scheme is the Zero-GST Warehouse Scheme (ZGS).

Here's a breakdown of the key Zero GST Schemes and related concepts in Singapore:

1. Zero-GST Warehouse Scheme (ZGS)

• Purpose: The ZGS allows approved companies to store imported non-dutiable goods in a designated, licensed warehouse without having to pay GST upfront. This is particularly beneficial for businesses involved in re-export or regional distribution, as GST is only payable when the goods are removed from the warehouse for local consumption.

  
  

• How it works:

  
  

  • When non-dutiable overseas goods are moved into a ZG warehouse, the import GST is suspended.

  • GST is only paid when the goods leave the ZG warehouse and enter the local market in Singapore.

  • If the goods are removed from the ZG warehouse for export, the supply is zero-rated (0% GST), provided the required export evidence is maintained.

  • If goods are transferred between ZG warehouses, GST is not payable.

  • Supplies of goods within a ZG warehouse (where ownership changes but the goods remain in the warehouse) are generally out-of-scope for GST, meaning no GST is charged or needs to be reported.

    
    

• Eligibility Criteria for ZGS: To qualify for the ZGS, a company typically needs to:

  
  

  • Be a GST-registered trader with the Inland Revenue Authority of Singapore (IRAS).

  • Be a registered trader with Singapore Customs.

  • Have good compliance and payment records with both Singapore Customs and IRAS.

  • Operate a storage-based facility with security measures, approved by Singapore Customs as the ZG area.

  • Maintain good stock record-keeping and warehouse procedures.

  • Have undergone a TradeFIRST assessment.

    
    

• Types of ZGS Licenses: There are three types of ZGS licenses (Type I, Type II, and Type III), with increasing levels of facilitation and stricter requirements for record-keeping and internal controls.

2. Major Exporter Scheme (MES)

• Purpose: While not strictly a "Zero-GST Scheme" in the sense of a warehouse, the MES is crucial for businesses that import a substantial amount of goods and then re-export them. It alleviates cash flow issues by suspending GST on imports.

  
  

• How it works: Under the MES, approved businesses can import non-dutiable goods with GST suspended at the point of import. They defer GST payment until their monthly GST returns are due, rather than paying upfront and claiming a refund later. This helps businesses avoid tying up significant capital in GST payments for goods that will eventually be zero-rated upon export.

  
  

• Eligibility Criteria for MES:

  
  

  • The business must be GST-registered.

  • Annual zero-rated supplies (exports) must account for more than 50% of total supplies or exceed S$10 million.

3. Zero-Rated Supplies

Beyond specific schemes, Singapore's GST system also designates certain supplies as "zero-rated," meaning GST is charged at 0%. This effectively means no GST is charged on the sale, but businesses can still claim input tax on expenses related to making these supplies.

• Key types of zero-rated supplies:

  
  

  • Export of goods: Goods sold to an overseas customer and shipped to an overseas address. This includes direct exports, indirect exports, and hand-carried exports via schemes like the Hand-Carried Exports Scheme (HCES) at Changi Airport.

  • International services: Services provided to overseas customers, as defined under Section 21(3) of the GST Act. Examples include international transport services, financial services for overseas customers, and consultancy services where the beneficiary is outside Singapore.

Key Differences and Benefits:

• ZGS vs. MES: The ZGS is primarily for the storage of imported non-dutiable goods with GST suspension, while the MES is broader, suspending GST on imports for businesses with significant export activities, regardless of where the goods are stored. Both aim to improve cash flow.

  
  

• Zero-rated vs. Exempt supplies:

  
  

  • Zero-rated supplies (0% GST): GST is charged at 0%. Businesses can still claim input tax (GST paid on purchases) related to these supplies. Examples are exports and international services.

  • Exempt supplies (No GST): These supplies are not subject to GST at all. Businesses cannot claim input tax on expenses related to exempt supplies. Examples include the sale and rental of unfurnished residential property, financial services, and the import/local supply of investment precious metals.

These schemes are designed to strengthen Singapore's position as a global trading and logistics hub by reducing business costs and improving cash flow for companies engaged in international trade.

How Bestar can Help

Engaging Bestar can be incredibly beneficial for businesses in Singapore when dealing with Zero GST Schemes (like the Zero-GST Warehouse Scheme and Major Exporter Scheme) and broader GST compliance. Here's how we can help:

1. Expertise and Guidance on Scheme Application and Eligibility:

• Understanding Complex Criteria: The eligibility criteria for schemes like ZGS and MES can be intricate, involving specific thresholds, compliance records, and internal control requirements. Bestar has in-depth knowledge of these requirements.

• Assessment and Strategy: We can assess your business operations, determine which schemes you qualify for, and advise on the most advantageous approach. We can also help identify any gaps in your current processes that might hinder your application.

• Application Preparation: Bestar assists in preparing and submitting accurate and complete applications to IRAS (Inland Revenue Authority of Singapore) and Singapore Customs, significantly increasing the chances of approval. This includes helping with documentation, financial statements, and operational descriptions.

2. Ensuring Ongoing Compliance and Mitigating Risks:

• Accurate GST Treatment: We provide expert advice on the correct GST treatment for various transactions, especially those involving imports, exports, and in-bond sales within ZG warehouses. This minimizes the risk of errors that could lead to penalties.

• Record-Keeping and Documentation: Bestar helps establish robust record-keeping systems and procedures to ensure you maintain the necessary evidence for zero-rated supplies and GST suspensions. This is crucial for audits.

• Assisted Self-Help Kit (ASK) Review: For schemes like MES, an annual self-review using the ASK is often mandatory. Bestar can perform and certify these reviews, ensuring compliance and early detection of errors. This is critical for scheme renewal and to avoid penalties.

• Internal Control Frameworks: We can help businesses set up strong internal controls and risk management frameworks to ensure proper accounting of GST, especially for larger businesses through initiatives like the Assisted Compliance Assurance Programme (ACAP).

• Staying Updated on Regulations: GST laws and regulations are dynamic. Bestar stays abreast of the latest changes and can advise your business on how these changes impact your GST obligations and the Zero GST Schemes you utilize.

3. Optimizing Cash Flow and Reducing Costs:

• Maximizing Benefits: By correctly applying for and utilizing Zero GST Schemes, Bestar helps businesses optimize their cash flow. For instance, suspending GST on imports under MES or ZGS avoids tying up significant capital in upfront tax payments.

• Identifying Savings Opportunities: We can identify opportunities to recover input tax and ensure that your business is taking full advantage of all applicable GST reliefs and concessions.

• Avoiding Penalties: Incorrect GST reporting or non-compliance can lead to substantial penalties. Bestar helps businesses avoid these costly mistakes through accurate filing and proactive risk management.

4. Streamlining Operations and Reducing Administrative Burden:

• Process Efficiency: Bestar can help streamline your GST-related processes, from permit declarations to return filings, making your operations more efficient.

• Reduced Workload: Outsourcing GST compliance to professionals frees up your internal resources to focus on core business activities.

• Liaison with Authorities: In case of audits, queries from IRAS or Singapore Customs, or the need for specific rulings, Bestar can act as a liaison, representing your business and handling communications effectively.

5. Specialized Expertise:

• Industry-Specific Knowledge: Bestar has specialized knowledge of various industries, allowing us to provide tailored advice that addresses the unique GST challenges and opportunities within your sector.

• Complex Scenarios: For businesses with complex supply chains, international transactions, or unique business models, professional advice is invaluable in navigating the intricacies of GST.

In essence, while Zero GST Schemes offer significant benefits, our proper implementation and ongoing compliance require specialized knowledge and diligent management. Engaging Bestar provides businesses with the expertise, support, and peace of mind needed to fully leverage these schemes and ensure robust GST compliance in Singapore.

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