Goods and Services Tax (Singapore)

Goods and Services Tax (Abbreviation: GST; Chinese: 消费税) was introduced in Singapore on April 1, 1994 at 3%, but later increased to 4% on 1 January 2003 and 5% on 1 January 2004. It was raised again to 7% on 1 July 2007.

Singapore’s GST is a broad-based consumption tax levied on import of goods, as well as nearly all supplies of goods and services. The only exemptions are for the sales and leases of residential properties and most financial services. Export of goods and international services are zero-rated.

Objectives

The GST was introduced as part of a larger tax restructuring exercise to enable Singapore toshift its reliance from direct taxes to indirect taxes. The GST also enables the country to sustain alower income tax rate.

The government argues that with an ageing population, Singapore’s income tax base is expected to decline. With a broad-based GST, the taxation burden will be more evenly spread among the population.Thus, the GST was introduced as part of a larger exercise to put in place a tax structure to see the country into the future.

A value-added tax, like the GST, also has several features that make it attractive. Being a tax on consumption, and not on income, the tax system inherently encourages savings and investments instead of consumption. The tax also has a self-policing mechanism that discourages evasion, unlike in a retail sales tax system or an income tax system where it would be relatively easier to evade.

GST increase to 7%

Details of the GST increase were announced on 15 February 2007 (Budget Day) by Second Finance Minister Tharman Shanmugaratnam. The increase was implemented on 1 July 2007 after a period of increased sales by Singaporeans attempting to beat the tax increase, and wariness amongst the lower-income groups. [http://www.channelnewsasia.com/stories/singaporelocalnews/view/285436/1/.html Low income families watch spending in anticipation of GST hike]

The government also announced a [http://www.gstoffset.gov.sg GST offset package] consisting of a set of comprehensive measures to help lower income groups. Citizens have to [http://www.gstoffset.gov.sg/Overview.htm#11 sign-up] beginning 15 May 2007 in order to receive their GST Credits in their bank accounts.

Absorbing the 2%

As a gesture of goodwill, and to assist low-income groups, several supermarket chains have agreed to absorb the hike for a period of time.

*Carrefour (for 1 month with POSB Everyday Card)
*Cold Storage (for 6 months)
*Giant Hypermarket (for 3 months on more than 800 items)
*NTUC FairPrice (for 6 months,selected items)
*Sheng Siong (for at least 1 month)
*Shop 'n Save (for 6 months)

Besides FairPrice, NTUC is also absorbing the 2% increase on NTUC Foodfare, NTUC Childcare, NTUC LearningHub, NTUC Club and NTUC Healthcare. These will also last for 6 months.

References

* [http://www.channelnewsasia.com/stories/singaporelocalnews/view/241058/1/.html GST to be raised to 7%: PM Lee]
* [http://adb.org/Documents/Events/2004/Fourteenth-Tax-Conference/text-chia.pdf GST in Singapore: Policy Rationale, Implementation Strategy & Technical Design]

External links

* [http://www.iras.gov.sg/ESVPortal/gst/index.asp Goods & Services Tax at Inland Revenue Authority of Singapore]