On the 20th of February 2018, Finance Minister, Mr Heng Swee Keat announced in his Singapore budget 2018 speech that the country’s GST rate will be increased from 7% to 9% starting from 2021 onwards. On the GST front, digital services such as Netflix subscriptions as well as apps purchased and downloaded via smartphone would be subjected to GST starting from year 2020. The new digital services ruling has taken effect since the start of this month. 

Words GST 2020 Policy Changes and the logos of Singapore Budget 2018, 2019 and 2020 overlaying background of Singapore's financial district

On 18 February 2019 during the Singapore budget 2019, the GST relief quota was lowered for both goods brought in by travellers who stayed shorter or longer than 48 hours. This ruling took immediate effect from 19 February 2019. The duty-free alcohol limit was reduced as well from 3 to 2 litres starting 1 April 2019.Here is a quick table summary of key highlights to GST policy adjustments for Budget 2018 and 2019:

Date 

Type of Tax Policy Change Effective Date

Budget 2018

GST on digital services Digital services will be subject to GST charges 1 Jan 2020

Overall GST rate

GST rate raised from 7% to 9%

2021 to 2025

Budget 2019

GST import relief (at least 48 hours outside Singapore)

GST relief quota lowered from SGD150 to SGD100

19 Feb 2019

GST import relief (less than 48 hours outside Singapore)

GST relief quota lowered from SGD600 to SGD500

19 Feb 2019

Alcohol duties Reduced alcohol duty-free concession from 3 litres to 2 litres

1 Apr 2019

GST on Digital Services

According to an IRAS news release, the implementation of digital tax has spurred more than 100 overseas digital service vendors registering for GST under Singapore’s Overseas Vendor Registration (OVR). The OVR regime was introduced specifically for overseas or foreign companies providing digital services to end consumers (Business-to-Consumer). This mandates GST registration for digital service providers outside Singapore provided 2 key criteria are fulfilled as follows:

  1. The supplier has global sales exceeding SGD1million and
  2. Digital services sales to Singapore consumers exceed SGD100,000.

Online marketplace operators that act as a middle person platform will also be regarded as digital service providers and liable for GST registration.

Reverse Charge Regime

For overseas Business-to-Business imports, if you are GST registered, GST is required to be accounted for all supplies consumed under the Reverse Charge regime. Singapore companies can then proceed to claim GST input tax provided they are not entitled to full input tax credit. The ruling has the intended effect of levelling the GST treatment for all services consumed locally. 

Budget 2020

The 2020 Budget announcement is set to be delivered on 18 February 2020. Singapore Prime Minister Lee Hsien Loong has dropped hints on the overall contents of the Budget, which is to support productivity gains for Singapore companies, enhance the skills and competitiveness of the local workforce, assist households in managing cost of living increases and increasing welfare for the elderly. These would mean extension of existing tax credit schemes aimed at worker productivity enhancement for businesses. Singapore businesses must continue to innovate in order to compete in an open global economy.

Impact on Singapore Businesses and Consumers

GST increase will have various implications on the bottom line of businesses and consumer spending behaviours. One common expectation would be lower consumer spending as consumers bear the final tax burden. GST imposed on digital services will see consumers paying higher prices for their online subscription for media or accounting solutions. Consumers can now use the IRAS GST-registered Business Search tool to check whether an overseas digital service provider is registered for GST.

The planned GST increase may occur in phases where the increase is done in 2 stages, with each phase being 1% increase in GST. Planned implementation remains an open question. 

With all the GST policies coming into effect in 2020 and 2021, consulting a qualified tax professional may be a good option to get your business ready for being GST compliant. Finding the right tax partner will also ensure you get the right advice for sourcing ways to minimize the impact on the planned GST increase in the following years.

Esther Mok
Tax Principal , Paul Wan & Co.
Esther Mok is a Fellow member of The Association of International Accountants, UK and an Approved Accredited Tax Advisor specializing in both Income Tax and GST with Singapore Institute of Accredited Tax Professionals (SIATP). She has behind her more than 20 years of tax experience dealing with international and local clients.
em@pwco.com.sg
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Esther Mok
Tax Principal , Paul Wan & Co.
Esther Mok is a Fellow member of The Association of International Accountants, UK and an Approved Accredited Tax Advisor specializing in both Income Tax and GST with Singapore Institute of Accredited Tax Professionals (SIATP). She has behind her more than 20 years of tax experience dealing with international and local clients.
em@pwco.com.sg
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