HCES and GST Implications: What Singapore’s SMEs Need to Know

As a small business owner in Singapore, managing the export of goods efficiently while staying compliant with GST regulations can be overwhelming. If your business regularly exports products, you’ll be pleased to know that the Hand-Carried Exports Scheme (HCES) can simplify the process. This scheme offers benefits like cost savings and smoother cash flow, but it’s important to understand the GST implications to ensure you comply with Singapore’s tax regulations.

In this blog, we’ll explain how the Hand-Carried Exports Scheme works, the GST implications for your business, and how to ensure you’re staying compliant with the rules.

1. Understanding the Hand-Carried Exports Scheme (HCES)

• Export via Changi Airport: Export goods without paying upfront GST.
• Zero-rated GST: No GST is charged on exported items if you meet requirements.
• Ideal for small businesses: Perfect for small quantities or goods carried by hand.
• Eligibility: GST-registered businesses with required export documentation.

Example:
A small business exporting leather products via Changi Airport ensures it follows all procedures, avoiding upfront GST and boosting its cash flow.

2. GST Implications for Businesses Using the HCES

• Zero-rating: Exports under HCES are exempt from GST.
• Non-compliance consequences: If not eligible, goods are standard-rated, leading to GST charges.
• Documentation: Export permits, travel records, and invoices must be maintained.

Example:
A stationery business exports products via Changi, ensuring all required documents are in order, benefiting from zero-rating and maintaining healthy cash flow.

3. Maintaining Compliance with GST Regulations

• Record keeping: Ensure export permits and invoices are in place.
• GST audits: IRAS may audit businesses using HCES; accurate documentation is essential.
• Penalties for non-compliance: Missing documents can lead to GST being charged and fines.

Example:
A chocolate business exports its products with proper permits and invoices, passing IRAS audits without GST liabilities.

✅ Let Counto’s tax specialists handle Singapore’s tax complexities for you. Our comprehensive accounting plans seamlessly integrate GST filing—no extra fees, just straightforward expertise. Explore our plans here.

4. Benefits of the Hand-Carried Exports Scheme for Small Businesses

• Cost savings: No upfront GST means more cash flow for business operations.
• Global competitiveness: GST-free goods are more attractive to international buyers.
• Simplified process: Less paperwork and fewer delays at customs.

Example:
An eco-friendly products business enjoys a competitive advantage, exporting GST-free items that attract international buyers.

5. GST Reporting Requirements for Hand-Carried Exports

• Zero-rated reporting: Clearly report exports as zero-rated supplies in GST returns.
• Missing documentation: Report as standard-rated if required documents are not provided on time.

Example:
A fashion business exports items but delays the export permit. It updates its GST return once documentation is complete, ensuring compliance.

6. Consequences of Non-Compliance with the Hand-Carried Exports Scheme

• Increased GST liabilities: Missing documentation can lead to GST being charged.
• Penalties: Non-compliance may lead to fines or other penalties.

Example:
A small business fails to maintain proper records for its exports, leading to GST being applied and potential penalties from IRAS.

Summary

The Hand-Carried Exports Scheme offers significant advantages for small businesses looking to expand internationally while benefiting from GST exemptions. However, to fully enjoy these benefits, you must ensure that your business complies with the necessary documentation and GST reporting requirements. Staying informed about the GST implications and maintaining compliance, your business can streamline the export process and avoid unnecessary tax liabilities. By understanding the Hand-Carried Exports Scheme and its GST implications, you’ll not only improve your business’s cash flow but also make your products more attractive to global markets, helping your business grow.

Experience the Counto advantage

Counto is the trusted outsourced provider of accounting, tax preparation and CFO services for startups and SMEs. Get accounting plans that combine bookkeeping with corporate tax filing to help you stay compliant at an affordable price. To learn more, speak to us directly on our chatbot, email [email protected], or use our contact form to get started.

Here are some articles you might find helpful:

Mastering expense management 

Improving cash flow

Guide to registering your company in Singapore 

Business Licenses & Permits

Opening a Business Bank Account