| Contract manufacturers play a key
role in our manufacturing sector. Some of our homegrown
contract manufacturers have become global players. These
companies usually contract to perform value-added manufacturing
activities on semi-finished goods consigned to them,
and then export the finished goods to their overseas
clients. In recent years, contract manufacturing has
become more complex. For example, instead of exporting
the finished goods, it is not uncommon for contract
manufacturers to be asked by their overseas clients
to deliver the finished goods to customers in Singapore.
This local delivery is considered a taxable supply under
our GST laws. However, in some instances, the overseas
clients to whom the finished goods belong do not designate
an agent in Singapore to account for the GST on their
behalf in respect of the local delivery. The contract
manufacturers in such a situation would have to bear
the GST on local delivery and have no recourse to claim
it back. This GST burden could make our contract manufacturers
less competitive internationally. |
| To help our local contract manufacturers
remain competitive, I have decided to introduce a scheme,
called the Approved Contract Manufacturer and Trader
(ACMT) scheme, to relieve contract manufacturers whose
businesses are substantially with overseas clients,
of this GST burden. Under this scheme, the local delivery
of the finished goods to the customers of the overseas
client and the fees for the value-added activities on
the goods will be deemed to be outside the scope of
GST and GST will not be chargeable. Instead, the overseas
client's customers who purchase and receive the goods
in Singapore will account for GST by way of a "reverse
charge". Besides contract manufacturers, this scheme
will be made available to traders who also engage in
value-adding activities substantially for overseas clients,
and face the same GST problem as the contract manufacturers
on their local deliveries. The scheme will be administered
jointly by IRAS, EDB and TDB. Further details of the
scheme will be released separately by the administering
agencies. |
