A freight forwarding company, Kian Min Express Transport Pte Ltd, is the first company to be penalised by IRAS for misusing its Major Exporter Scheme (“MES”) status. The MES is a special scheme that allows for the suspension of GST at the point of importation of goods. The company was fined $24,000 on 12 charges of failure to comply with the MES’ conditions imposed by the IRAS.
Generally, the approved MES business must comply with the following conditions:
1. Import only own goods into Singapore;
2. Not allowed to import goods into Singapore using its MES status on behalf of any other Singapore companies; and
3. Must have control over the custody and possession of the goods imported into Singapore.
Failure to comply with MES conditions
Kian Min Express used its MES status to enable two freight forwarders, Soon Brother’s Transport & Shipping Service (“SBT”) and Narita Carrier Logistic (“NCL”), to import goods into Singapore without paying GST from July 2007 to December 2008. The total amount of GST not paid on the goods imported by SBT and NCL was close to $4 million.
SBT and NCL are required to pay GST to Singapore Customs on importation of goods into Singapore. However, Kian Min Express helped SBT and NCL bring their goods into Singapore GST-free by using its MES status when it also did not have control over the custody and possession of those goods imported by SBT and NCL. Kian Min Express’ only role in the importation of the goods was to complete paper declarations of the MES permits to facilitate their import. In return, Kian Min Express charged SBT and NCL a fee for each of the MES permit declarations made on their behalf.
IRAS takes a serious view on abuse of MES
Inland Revenue Authority of Singapore (IRAS) takes a serious view of taxpayers who do not comply with the requirements of the scheme or wilfully abuse the scheme, and will not hesitate to bring the offenders to court.
The abuse of the scheme by offenders who facilitate the import of goods belonging to unauthorised third parties without paying GST can lead to leakage to GST revenue.