Singapore issues guidance about GST rules for logistics and freight Forwarding

Services by Logistics Businesses

In the logistics service business, there are three main categories of services:

1. Transportation Services (including ancillary handling activities such as stuffing, loading and unloading);
2. Handling Services; and
3. Storage Services.

The transportation, handling and storage services may be provided in any of the three main geographical regions:

1. Outside Singapore;
2. Within the Free Trade Zones (FTZs) or designated areas of a port, terminal and airport (“designated areas”); or
3. Within Singapore (including Zero-GST/ Licensed / Bonded warehouses) but outside the FTZs or designated areas.

Zero-Rating of Services

Generally, all supplies of services made in Singapore in the course of your business are subject to GST at the prevailing rate.

You can zero-rate (i.e. charge GST at 0%) your supply of services to your customers only if your supply fulfils specific conditions to qualify as an international service under Section 21(3) of the GST Act.

In addition, you must support with documentary evidence or records that the conditions for zero-rating are satisfied.

The relevant zero-rating provisions in the GST Act applicable to the logistics service industry are:

Recovery of Costs

Recovering Reimbursements

In the course of providing logistics services to your customer, you may incur costs in your own capacity (i.e. as a principal) and recover these costs from your customer.

For GST purpose, the recovery of costs incurred by you as a principal is termed as reimbursement and will form part of the supply of services to your customer.

Recovering Disbursements

Where the costs recovered from your customers are not incurred by you as a principal, but you are merely making payment on behalf of your customer, such cost recovery is termed as disbursement.

For the costs paid on behalf of your customer, you cannot claim the GST incurred as the supply is made to your customer.

Examples of disbursement are:

• Recovery of import GST paid by you on behalf of your customer who is the actual importer responsible for paying GST on the imports to the Singapore Customs; and
• Recovery of freight or insurance charges paid by you when the freight or insurance services are separately contracted by your customer with the supplier.

Importing Goods on Behalf of Customers

You may be required to import goods on behalf of your customers who may either be local importers or overseas importers.

Importing Goods for Local Customers

When you act for an importer and pay the import GST as a forwarding agent for your local customer, you cannot claim the GST paid as your input tax as the goods do not belong to you.

The payment of import GST is merely a commercial arrangement between you and the importer.

Importing Goods for Overseas Customers

As a Declaring Agent

When you are merely providing freight forwarding services and import goods as a declaring agent for overseas persons, you are not allowed to make any claim on the import GST paid on your customer’s behalf.

The import GST may be claimed by the overseas customer, if your customer is GST-registered.

As Section 33(2) Agent

You may import and supply goods on behalf of an overseas person who is not GST-registered or if he is GST-registered, the GST registration is as a pay-only person under the Overseas Vendor Registration (OVR) regime.

For GST purposes:

1. The goods are imported by you. You are entitled to claim the GST paid (subject to the conditions for claiming input tax); and
2. Any subsequent supply of the goods is made by you as if you are the principal.
   1. If you sell the goods locally, you should standard-rate the supply (i.e. charge GST).
   2. If you export the goods and maintain the required export evidence, you may zero-rate the supply. For the types of export evidence to maintain under each type of export scenario, refer to:

• GST: Guide on Exports (PDF, 717KB)
• GST: Guide on Hand-Carried Exports Scheme (PDF, 332KB)

You have to account for the output tax on standard-rated supplies and are allowed to claim the GST paid on importation as your input tax, subject to the conditions for input tax claim.

For more information on section 33(2), please refer to the GST: Guide on Imports (PDF, 423KB).

As Section 33A Agent

When you import goods belonging to an overseas person and subsequently export the goods (without a subsequent supply of the goods), you may claim the GST paid at importation on behalf of the overseas person (i.e. as an agent) under section 33A if certain requirements are satisfied. The overseas person must not be GST-registered or if he is GST-registered, the GST registration is as a pay-only person under the OVR regime.

For more information on section 33A, please refer to the GST: Guide on Imports (PDF, 423KB).

Major Exporter Scheme

When you are acting as a section 33(2)/33A agent and you are under the Major Exporter Scheme (MES), you can use your MES status to import non-dutiable goods belonging to your overseas principals for subsequent sale in Singapore or re-export on behalf of the overseas principals.

You are required to provide sufficient audit trail for the import and supply of goods made on behalf of the overseas principal. You must keep separate records for goods belonging to the overseas principal and comply with the record keeping requirements for GST.

GST Schemes

There are GST schemes introduced to help logistics companies and freight forwarders to better manage their GST cash flow. For more information, please refer to:

• Approved Third Party Logistics (3PL) Company Scheme
• Major Exporter Scheme
• Zero-GST (ZG) Warehouse Scheme