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Singapore Clarifies GST For International Logistics Services

by Mary Swire, Tax-News.com, Hong Kong

29 August 2012


On August 28, the Inland Revenue Authority of Singapore issued a goods and service tax (GST) e-guide for the logistics service industry that looks especially at what international services may be zero-rated.

The guide has been produced for those businesses that are GST-registered in Singapore and are in the business of providing logistics services, such as the transportation, handling (for example, labelling, re-packing and inventory control) and storage of goods.

It seeks to explain the GST principles relevant to the logistics service industry, and to clarify the GST treatment on some of the more common services provided by businesses in the logistics service industry, within a general rule that all supplies of services made in Singapore in the course or furtherance of a business are subject to GST at the prevailing rate.

The supply of a logistics service can be zero-rated (charge GST at 0%) to customers only if it fulfils specific conditions to qualify as an international service under Singapore’s GST Act. In addition, documentary evidence or records must be supplied to show that the conditions for zero-rating are satisfied.

An overview is given of the relevant zero-rating provisions in the GST Act applicable to the logistics service industry: international transportation (including local transportation and handling services ancillary to international transportation); handling or storage services provided within FTZs and designated areas on imported goods or goods for export; handling, transportation or storage services provided within Singapore (but outside FTZs and designated areas) at the first leg of export to an overseas customer; and services provided to an overseas customer that are supplied directly in connection with goods for export.

Therefore, for example, in the logistics service industry, the services provided for transporting or arranging the transport of goods are international services, and may be zero-rated, where the transport is, by air or land, from a place outside Singapore to another place outside Singapore; from a place in Singapore to a place outside Singapore; or from a place outside Singapore to a place in Singapore.

By sea, zero-rating occurs where transport is from a place outside Singapore to another place outside Singapore; or from a place in Singapore to international waters; or from international waters to a place in Singapore.

All freight-related charges in relation to international transportation can therefore be zero-rated to both local and overseas customers, including fuel surcharges, terminal handling charges, agency fees and documentation fees (such as delivery order fees, air waybill/bill of lading fees and bill of lading surrender fees). All such billings that relate to international transportation services can be zero-rated.

Local transportation services may be provided within Singapore as part of international transportation to move goods to their requested destination. Those entire transportation services (both international and local segments) can be zero-rated if undertaken by the same service provider for both the international and local transportation. Both of the services do not need to be physically performed by the same service provider, but the latter must contractually supply both the international transport and the local transport to the local or foreign customer.

On the other hand, where only local transport is being provided within Singapore (including to or from zero-GST/licensed/bonded warehouses), services to customers (both local and overseas) are usually subject to standard GST.

In addition, it is further specified that, as goods held in FTZs and other designated areas are generally goods shipped from overseas waiting to be imported for local deliveries, or goods (moved in from within Singapore) waiting to be exported to overseas, the supply of handling services and storage services within FTZs or designated areas can be zero-rated, regardless of whether they are provided to local or overseas persons.

The conditions for zero-rating are that the handling or storage services provided must occur within the FTZs or designated areas; and they are provided in respect of goods that are imported or for export.

TAGS: compliance | tax | business | marine | tax compliance | aviation | goods and services tax (GST) | Singapore | fees | services

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