SINGAPORE – The goods and services tax (GST) will be extended to low-value goods worth $400 or less imported by air or post, and imported business-to-consumer (B2C) non-digital services from Jan 1, 2023.

This will level the playing field for local businesses, Second Minister for Finance Indranee Rajah said on Tuesday (Nov 2) during the debate on the GST (Amendment) Bill, which Parliament later passed.

Ms Indranee said the extension of GST to those areas also helps to defend Singapore’s GST revenue base from being eroded as the digital economy grows and more people shop online.

Explaining the need for these tax changes, she highlighted how Singapore currently does not impose GST on goods imported by air or post with a value of $400 and below, a gap that puts local businesses at a disadvantage.

The updated measures will allow local businesses to compete effectively as overseas suppliers of goods and services will be subject to the same GST treatment as local players, Ms Indranee said.

She noted that Singapore is not the first jurisdiction to implement GST on low-value goods imported by air or post, or on imported services. Australia, the European Union, New Zealand, Norway, Switzerland and Britain have extended their GST or VAT (value-added tax) regimes to do so.

The Bill also updated the GST treatment for media sales, which refer to the sale of advertising space for hard copy print and outdoor advertisements, advertising airtime for broadcasting by television and radio, as well as media space for Web advertising through e-mail, the Internet or mobile devices.

From Jan 1, 2022, GST treatment will be based on where the customer and direct beneficiary of the service belongs, rather than where the advertisement is circulated.

Other changes included updating the rules so people have clarity on whether the old or new GST treatment applies.

Seven MPs spoke during the debate, surfacing questions on the implementation and enforcement of the new GST rule, how to ensure compliance from foreign suppliers of goods and services, as well as feedback on the GST Voucher scheme.

Mr Don Wee (Chua Chu Kang GRC) and Mr Louis Ng (Nee Soon GRC) asked how GST will be implemented on imported low-value goods and B2C non-digital services.

This will be done by widening the scope of Singapore’s existing overseas vendor registration and reverse charge regimes, Ms Indranee said.

She noted that these regimes have been in place since Jan 1, 2020, to tax business-to-business imported services and B2C imported digital services.

Responding to Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) and Mr Wee on how the Government will ensure overseas vendors comply with the new GST regime, Ms Indranee said the Inland Revenue Authority of Singapore (Iras) has gained experience in administering and enforcing such tax treatment from the regime for overseas B2C digital service providers.

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At the same time, the rules of Singapore’s overseas vendor registration regime are consistent with those of other jurisdictions, she noted. “This makes it easy for overseas vendors to comply and also provides certainty for the industry.”

At the same time, Iras will identify and engage overseas vendors that should be GST-registered and verify their reporting after registration. Vendors that do not comply will face existing penalties under the GST Act.

Replying to Workers’ Party MP Louis Chua, Ms Indranee said Singapore collects about $250 million in GST revenue a year from the overseas vendor registration and reverse charge regimes.

The new measures would yield about $130 million yearly.

Mr Chua (Sengkang GRC) also asked about the need for a GST hike from 7 per cent to 9 per cent, which the Government has said will be implemented by 2025.

He called it “an unnecessary burden” on Singaporeans, given inflation concerns and the uncertain recovery of the labour market.

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In reply, Ms Indranee stressed the need to consider Singapore’s revenue and expenditure situation, where taxes and fees account for 80 per cent of Singapore’s total revenue.

The country is already relying on the Net Investment Returns Contribution and has used up budgetary surpluses of the entire last decade due to Covid-19, she said.

Singapore is already digging into its savings and has very large expenditure on the horizon, she added, citing increased healthcare expenditure and investments to mitigate climate change. “Money must come from somewhere,” she said.

Responding to Mr Yip Hon Weng (Yio Chu Kang) on whether additional help will be provided on top of the $6 billion Assurance Package and GST Voucher scheme, she said the Government will continue to absorb GST on publicly subsidised healthcare and education, and will give more aid to lower-income groups.

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