Singapore

GST pain points in the logistics industry

GST-registered logistics businesses (“GRLBs”) that have been managing GST risk on a broad level could face a mismatch in expectations and GST compliance level against that of the GST authorities.

Goods and Services Tax (“GST”) is a transactional-based tax applicable on sale and purchase of goods and services. Considering its unique focus on an individual transaction (i.e. sale and purchase), GST-registered logistics businesses (“GRLBs”) that have been managing GST risk on a broad level could face a mismatch in expectations and GST compliance level against that of the GST authorities.

A recent IRAS industry-focused GST audit for close to 300 GRLBs concludes that 75% of the targeted population have incorrect classifications relating to invoices raised for services provided and/or goods imported on behalf of overseas non-GST-registered owners. Transactions relating to expenses incurred by GRLBs (i.e. usually considered as low risk from the accounting personnel perspective during processing) are also noted as areas overlooked prior to the filing of the respective GST returns.

GST pain points

In line with the majority of GRLBs’ intentions to maximise cash flow (i.e. one way is to minimise GST exposure and potential penalties for incorrect classifications) and ensure smooth business operations with minimal disruptions (e.g. avoid handling an unplanned IRAS GST audit), targeted GST risk management in the following areas are recommended for GRLBs:

  • Ability to identify and segregate international forwarding services (attracts 0% GST) from pure local transport services (attracts 7% GST);
  • Understand the details of warehousing and storage services (0% GST could apply, subject to certain conditions) and differentiate them from rental of warehouses (7% GST applies) to overseas customers;
  • Re-align their GST understanding on recovery of expenses paid on the customer’s behalf (e.g. where the supplier’s invoice was addressed to the GRLB, which was subsequently billed and it recovered the expenses incurred, 7% GST or 0% GST would apply);
  • Be clear about their role (including documentation maintenance) as GST agent for overseas customers/principals under Section 33(1), Section 33(2) and Section 33(A) of the GST Act;
  • GST implications arising from certain payroll deductions made from their employees’ salaries (e.g. co-sharing insurance premiums, recovery of meal and transport expenses paid on employee’s behalf); and
  • The need to reverse GST claims made on expenses should the GRLB’s accounts payable aging records indicate payment to the specific supplier has been outstanding for more than 12 months.

 

Your GST compliance partner

By tapping into our in-house GST Analytics expertise, the GST Assisted Self-help Kit (ASK) and GST Assisted Compliance Assurance Programme (ACAP) initiatives, we assess GRLBs’ GST compliance frameworks and shed light on gaps that may lead to penalties. We help businesses take advantage of the Voluntary Disclosure Programme (VDP), allowing them to disclose incorrect classifications confidently  with lower or no penalties. Our team of GST specialists also offers advisory and compliance support to minimise GST risks.

Contact our team of GST professionals:

Richard Ong, Partner & Head, GST Services
Accredited Tax Advisor (GST), SIATP
T +65 6594 7821
richardong@RSMSingapore.sg

Huang Yanlin, Director
Accredited Tax Advisor (GST), SIATP
T +65 6715 1142
huangyanlin@RSMSingapore.sg

Lee Meow Ling, Senior Manager
Accredited Tax Advisor (GST), SIATP
T +65 6715 1143
leemeowling@RSMSingapore.sg