The major exporter scheme (MES) was introduced by the Singapore government to encourage businesses that import and export goods in large amounts. This scheme increases the cash flow and working capital for such businesses. The Inland Revenue Authority of Singapore (IRAS), the agency responsible for the administration of taxes, is the implementing agency for this scheme.
Need for the scheme:
Normally, the Goods and Services Tax (GST) is levied on goods imported by the businesses, which are to be paid to Singapore Customs. The businesses then wait to file the GST return before claiming input tax credit or refund for the import GST paid.
This can lead to cash flow problems for businesses involved in the export of goods as they receive no revenue from the supplies on which there is zero GST to compensate for the cash outflow on imports.
The benefit of the scheme:
The MES enables GST suspension on imported goods and on goods that are removed from a warehouse on which no GST is imposed for eligible businesses. This way, the businesses enjoy cash flow relief from the suspension of import GST.
Eligibility conditions:
Not all businesses are eligible to enjoy the benefits of this scheme. In order to become a beneficiary, businesses need to fulfil certain conditions, which are as follows:
1. GST-registered business.
2. Active and financially solvent.
3. Involved in import of goods or planning to import in the future for business needs.
4. The supplies must be either more than 50% of total supplies or their value be more than Singapore's $10 million in the past year.
5. Proper accounting records and effective internal controls should be maintained.
6. Good compliance record maintained with IRAS and Customs office.
How to apply for MES status:
To receive benefits under the scheme, the businesses have to apply for the MES status. The steps to be followed are:
Validity of MES:
The MES status of a business will be valid for 3 years from the date of approval of the application. However, it can be withdrawn at any time if the business fails to comply with any of the eligibility conditions.
The businesses can apply to renew the MES status when it is due for review by the IRAS.
Singapore came 2nd in Asia and 18th globally in ease of doing business. It makes doing business simply by introducing initiatives like the MES and B2B portals for import-export businesses, which are safe like Tazapay. These efforts can go a long way in making Singapore a transhipment hub for goods around the world.
