Resolve cash-flow conundrum faced by GST-registered exporting SMEs

THE report analysing the issues facing Swiber Holdings ("Working capital crunch may have been straw that broke the firm", BT, Aug 3) brings forth the critical point that insufficient cash on hand can trigger the failure of a business. Small and medium enterprises (SMEs) need to plan their cash-flow projections for their daily operational needs and the repayment schedule of loans taken from financial institutions.

GST-registered SMEs that are exporters have to contend with another institution which has a direct impact on their cash flow - the Comptroller of Goods & Services Tax (GST). When these SMEs make a local purchase, they pay 7 per cent GST upfront to suppliers, and a refund from the Comptroller of the GST can be made only via submission of monthly or quarterly returns by these SMEs. Before approving the refund, GST auditors require the submission of documents to prove that the goods have indeed been exported.

Then the cash-flow conundrum arises because there is no fixed period for the GST auditors to complete their audit. The time frame can range from a few weeks to one year. During this period, all outstanding GST refunds are withheld until the audit is complete. Affected SMEs have no recourse to appeal to the GST Board of Review since this procedure is made available only after the completion of the audit. Unlike many other countries with GST, there is no ombudsman in Singapore to act as an independent arbitrator to expedite the process.