With Parliament passing the Goods and Services Tax (Amendment) Bill on 7 November, here are six amendments to note in the coming year.
The Singapore Government will go ahead with the planned Goods and Services Tax (GST) increase in 2023, after the GST (Amendment) Bill was passed in Parliament on Monday (7 November 2022). With this, from 1 January 2023, the GST will increase from 7% to 8%; and subsequently, will increase from 8% to 9% from 1 January 2024.
In his second reading of the Bill in Parliament on Monday, Deputy Prime Minister and Minister for Finance Lawrence Wong noted that the proposed change had been "robustly debated" in the House. He then added that the GST rate increase is "an important revenue move that will provide us with additional resources to meet our growing healthcare expenditures and to take better care of our growing number of seniors."
In line with this, the DPM announced a S$1.4bn enhancement to the Assurance Package, which was first introduced by DPM Heng Swee Keat in Budget 2020. This will delay the impact of the upcoming GST increase on Singaporean households for at least five years, and at least 10 years for lower-income households, he shared. [Read HRO's coverage on the enhancement here.]
DPM Wong then elaborated on another "important design feature" of the GST system in Singapore – the GST Voucher (GSTV) Scheme and the Government absorbing GST for subsidised education and healthcare services.
- The GSTV has four components: cash; MediSave for seniors to support their medical needs; U-Save rebates to offset utilities bills, and S&CC rebates to offset S&CC bills.
- At the same time, the Government will continue to absorb GST for publicly subsidised healthcare and education.
As such, the overall GST system includes:
- In effect, a multi-tiered GST system – one that is tiered by income levels, with lower-income households paying a much lower effective GST rate than higher-income households.
- on average, the bottom 10% of households do not pay any GST at all after the permanent offsets. This includes many retiree households without income.
- even after the GST increase, the effective GST rate for households in the first three income deciles remains unchanged at below 3%. This means that the GST increase will not negatively impact them, DPM Wong shared.
- the full impact of the GST will be borne largely by higher-income households, as well as tourists, and foreigners who are based in Singapire. "This is also the group that contributes the biggest share to net GST revenues from households and individuals," the DPM added.
The DPM also highlighted five other amendments that will take effect under this Bill. A snapshot of each can be found below:
An update to the GST treatment for a supply of travel arranging services. Examples of such services include the arranging and facilitation of international transport, accommodation, and travel insurance.
- Under clause 7, and with effect from 1 January 2023, the GST treatment for a supply of travel arranging services will be based on where the person who contracts for the service and where the person who directly benefits from the service belong. For example, if the contractual customer of the service belongs to Singapore, then GST will be charged at the standard rate.
- This amendment will also ensure consistent GST treatment for travel arranging services, regardless of whether they are rendered by local or overseas providers.
An update to the transitional rules for change in GST treatment.
- Clauses 8, 12, 13, 14, and 15 update the Transitional Rules in the GST Act. These Rules are to be applied during a change in GST rate or treatment. Based on the Rules, taxpayers will determine whether the old or new GST rate or treatment applies to their supplies. The amendments provide greater clarity in the application of the rules, particularly for more unique supplies made, such as supplies that span both a change in GST rate and the effective date of GST registration of a business.
A refinement of the rules for taxing low-value goods and imported services under the Overseas Vendor Registration and Reverse Charge regimes.
- The refinements, under clauses 2, 3, 5, 16, 17, 19, and 20, seek to prevent double taxation, provide tax certainty, and ease the compliance burden of businesses. For example, to prevent double taxation, the refinements clarify that where overseas vendors procure services already charged with GST from Singapore suppliers, and subsequently onward supply these same services to their own customers in Singapore, they need not charge GST on these onward supplies. This is provided the overseas vendors are on the “pay-only” regime where they do not make any claims for refund of GST they incur on their purchases.
Providing criminal sanctions to counter Missing Trader Fraud scheme.
To directly target the perpetrators of Missing Trader Fraud, criminal sanctions based on a two-tiered approach were proposed to be introduced from 1 January 2023.
- Tier 1 offences apply to Missing Trader Fraud masterminds, co-conspirators, and syndicate members who participate in such fraud schemes. Tier 1 offences carry a maximum imprisonment term of 10 years, and/or maximum fine of S$500,000. "This is a step up from the maximum imprisonment term of seven years for the offence of fraudulent trading, which such offenders are currently prosecuted under, and is intended to convey a strong deterrence message," DPM Wong shared.
- Tier 2 offences apply to current or former sole-proprietors, partners or directors of business entities that are used in Missing Trader Fraud schemes. These persons typically incorporate entities which are then used by syndicates for fraudulent purposes. Tier 2 offences carry a maximum imprisonment term of 1 year, and/or maximum fine of S$50,000.
Providing powers for the Comptroller of GST to extend GST filing deadlines.
The last amendment, provided by clause 9, empowers the Comptroller of GST to extend the filing deadline for GST returns. This, DPM Wong noted, allows the Comptroller the flexibility and authority to administer the GST regime efficiently, by extending the deadline for filing GST returns where necessary, such as during the COVID-19 pandemic.
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