With effect from January 1 2023, the Minister for Finance announced Singapore’s goods and services tax (GST) has been extended to imports of low-value goods (LVG).
It is an 8% Goods and Sales Tax (GST) on Low-Value Goods (LVG) that applies to all goods valued at or below SDG400 that are imported into Singapore by air or post.
The change follows a rise in eCommerce activity and cross-border transactions involving LVG imports where GST or Value-Added Tax (VAT) was not collected. This move is aimed at levelling the playing field for local businesses within Singapore to compete effectively.
This guide will take you through how the extension of the GST impacts overseas logistics providers and how you can better prepare for it.
You will learn:
What are Low-Value Goods?
The Inland Revenue Authority of Singapore (IRAS) defines LVG as goods that at the point of sale:
Are not dutiable goods (or where certain waiver of duties apply);
Are not an exempt supply;
Each item of the goods has an entry value that does not exceed the GST import relief threshold of SGD400; and
Are to be delivered to Singapore via air or postal service.
What Businesses are Affected by GST?
The new GST on LVG may affect a wide range of businesses (including logistics service providers and eCommerce enablers that are not based in Singapore).
The responsibility to account for GST on the imported LVG lies with the GST-registered customer in Singapore regardless of whether the supplier is local or overseas, and irrespective of the supplier’s GST registration status.
If the customer isn’t GST-registered, the responsibility to account for GST may fall on one of the following entities:
Overseas Suppliers: Belonging status outside of Singapore (i.e. has neither a business establishment, fixed establishment nor usual residence in Singapore).
Overseas Electronic Marketplace Operators: When the Electronic Marketplace is regarded as the supplier under certain conditions.
Overseas Redeliverers: When the Redeliverer is regarded as the supplier under certain conditions.
You can find more details on the conditions listed above on slides 15, 16, and 17 under Extended Overseas Vendor Registration (OVR) Regime by IRAS.
Which Businesses Must Register for GST?
An overseas vendor (i.e., supplier, electronic marketplace operator, or redeliverer) must register for GST if they meet the threshold for mandatory GST registration.
In a nutshell, if the taxable turnover for the past 12 months exceeds SDG1 million or if it is expected to exceed SGD1 million in the next 12 months, the vendor must register for GST.
What Happens If You Fail to Register for GST?
Overseas vendors that must register but do not comply may be subject to the same penalty and compliance measures as domestic GST-registered persons.
Failure to register for mandatory GST may result in a fine up to SGD5000, and in default of payment, an imprisonment term of up to 6 months. To avoid late filing or non-filing for mandatory GST, IRAS provides preparation checklists for entities registered under the OVR Regime for LVG and remote services.
Once registered, late tax payments may result in a 5% penalty. 60 days after the due date, there will be an imposition of an additional 2% penalty for every month the tax remains unpaid (subject to a maximum of 50% of the outstanding tax).
You can find more information regarding penalties for not registering for GST, charging GST, and the process of paying GST here.
Recommendations If Your Business Affected by GST
Bloomberg published an insightful list of recommendations for overseas vendors that we are reproducing here.
Determine the GST registration status of the customer
Businesses should identify whether their customers are GST-registered in Singapore, as this affects who is responsible for accounting for GST on the supply of LVG. If you are a supplier of LVG outside Singapore’s customs territory, you are required to register for GST if you meet the thresholds of the OVR regime under a retroactive or prospective basis as outlined above.
Characterise the business transaction
Businesses should examine their business operations to the various suppliers of LVG to customers to determine if they are regarded as direct suppliers, electronic marketplace operators, or re-deliverers. This is crucial because under certain circumstances, an electronic marketplace operator or re-deliverer will be treated as the supplier of the LVG and therefore responsible for the GST on the supply of LVG to customers, instead of the underlying supplier.
Determine the entry value of LVG
It’s important to note that the entry value is not the value of the supply of the LVG (i.e., import value) on which GST is to be accounted. Generally, the import value includes the cost, insurance and freight value, any custom duties payable, commission, and other incidental charges. In other words, business will have to contend with two different sets of values. For ease of compliance, businesses may elect to use the import value of the goods to determine their entry value.
Apply GST to multiple goods shipped as a single consignment
In general, goods bundled in a single shipment are still valued separately and treated as individual items. A GST-registered business may elect to apply the entry value threshold on a per-consignment basis instead, subject to circumstances — for example, having full oversight of the supply and logistics chain. This is highly recommended, especially to ease the administrative burden in determining the individual entry value of each item.
Be aware of transitional rules
There are transitional rules that may affect the application of GST on LVG. For example, even if an overseas supplier’s invoice was issued before Jan. 1, 2023, and the goods are delivered to the customer and payment is received on or after Jan. 1, the supply of LVG will still be subject to GST on the lower of the payment received or value of the goods provided.
How Luwjistik Helps
Luwjistik offers several valuable tools and services for logistics companies to navigate through local rules and regulations across Southeast Asia successfully and with ease.
Node calculator
Our advanced node calculator provides itemised costs of shipments at every stage of the supply chain. After inputting the GST registration details, it can calculate shipping costs as well as duties and taxes (such as GST) before shipping, offering better cost visibility and predictability.
Labeling
Luwjistik automatically prints standardised shipping labels for all goods with GST payments marked.
Order management system (OMS)
One of the key features of the Luwjistik platform is the order management system that allows customers to track and trace every order through every leg of the delivery journey, including through customs clearance. It also provides notifications via email if any shipment is delayed at customs in case of GST disputes.
Transparent communication
Within Luwjistik, customers can communicate directly with network partners to make inquiries and manage disputes entirely within the single unified platform.
Expert support services
Luwjistik provides support services staffed by logistics experts to help customers navigate through issues and disputes with every leg of the delivery journey, including customs and GST.
If you encounter any issues during shipment, contact our support team at [email protected] for further information and assistance.