Opinions on Budget 2010: Deferring Import GST

Currently, 7 percent Goods and Services Tax (GST) is payable on all importation of goods into Singapore at the time of import. The exception is when import relief is granted or GST is suspended under approved GST schemes, such as the Major Exporter Scheme.

A new scheme would take effect on 1 October 2010 to help approved GST-registered businesses to defer import GST. To qualify, the approved GST-registered businesses must have good compliance records and file monthly GST returns (instead of quarterly). More details would be released by the Inland Revenue Authority of Singapore (IRAS) by March 2010.

The new scheme may ease cash flow burden of the approved GST-registered businesses. This is because no actual payment of import GST needs to be made to the Singapore Customs before imported goods are cleared into Singapore Customs’ territory.

Under the proposed scheme, an approved GST-registered business that imports goods for the making of taxable supplies on 1 October 2010 would account as output tax the import GST and claim the corresponding import GST as input tax in the monthly GST return for October 2010 (due date of filing is 30 November 2010). Effectively, there is no actual GST payment required for importation of goods.

Without the scheme, it would have had to pay import GST on 1 October 2010 to the Singapore Customs, claim the import GST as input tax in the GST return for the December quarter 2010 (due date of filing is 31 January 2011). This would result in a cash flow timing differential.

Consequently, the new scheme would improve cash flows of businesses that source its goods from overseas suppliers. The new scheme would appeal to small and medium businesses which are usually strapped for working capital.

In determining whether a GST registered business ought to apply for the new scheme, it should consider the additional compliance costs associated with filing 12 monthly GST returns, instead of the normal 4 quarterly GST returns. In addition, the monthly filing of GST returns may result in earlier payment of net GST payable (compared to quarterly filing) to the IRAS.

Further analysis on the benefits and costs of the new scheme should be performed when more details are released by the IRAS.

The writer is an Executive Director of KPMG Tax Services in Singapore. The views expressed herein are those of the author and do not necessarily represent the views of KPMG in Singapore.