Singapore sets zero GST rate on shipping lines

INTERNATIONAL shipping lines using Singapore port have been informed that most of their services will be zero-rated under the country's proposed Goods and Services Tax.

However, the Port of Singapore Authority said it had to study the proposed tax, adding that it was too early to determine the cost of administering it and whether the costs would be passed on to port users.

In a statement, the Inland Revenue Authority of Singapore (IRAS) said the transport of goods to overseas destinations would be zero-rated, though the domestic movement of goods would be subject to GST.

This should be welcome news for shipping lines, which had expressed concern over the possibility of the tax being imposed on freight charges.

The IRAS also clarified that bunkering and ship-repair services to foreign companies would be zero-rated.

It said: ''Ship repairs and bunkering services provided by Singapore companies to foreign ships which do not have a business establishment in Singapore at the time the service is performed will be zero-rated as they are treated as if they are exports.'' It said, however, that such services offered to local companies would be liable for GST, though the ship owner would be able to claim input tax credit for the tax paid.

One Singapore owner said treating services bought by foreign and by local companies differently made sense since the GST was aimed at domestic consumption.

The GST should have little impact on ship building and repair services as Singapore shipyards catered mainly to an international clientele.

For instance, foreign companies generate more than 90 per cent of Keppel Shipyard's repair business and 100 per cent of its vessel and rig building business.

A Sembawang Shipyard official said that with the zero-rating, the impact of the GST on the yard would be minimal.

And a Keppel spokeswoman said: ''We have clarified with the GST secretariat and confirmed that we will be granted a zero-rating on the repair and building of foreign-owned vessels.

''We will be able to claim refund of the GST that we have paid on goods and services needed for our operations.

''Therefore, when the corporate tax is reduced, we will stand to gain from this arrangement.'' Asked how the GST would affect Singapore Airlines and its cargo business, Mr Karmjit Singh, the national carrier's assistant director said: ''SIA will have to study the GST. It is still too premature to assess its impact.''