From today, Jan. 1, 2023, the Goods and Services Tax (GST) rate will increase from seven to eight per cent.
Another increase from eight to nine per cent will take place from Jan. 1, 2024.
The GST hike announcement was made by Finance Minister and Deputy Prime Minister Lawrence Wong as part of the 2022 Budget statement on Feb. 18, 2022.
What GST applies to
Aside from being levied on goods and services supplied in Singapore by GST-registered persons, the new GST rate will now apply to all goods imported into Singapore, including items valued up to S$400.
Yes, this means that your online shopping from overseas retailers, whether imported via air or post, will be subject to GST. Purchases worth S$400 or less were previously exempt.
Currently, GST is already being collected on goods imported via land or sea, regardless of value. Purchases valued above S$400 are also already subject to GST.
As of January 2023, business-to-consumer imported non-digital services, such as the provision of educational learning and telemedicine, will also be subject to GST.
According to the Ministry of Finance, the extension of GST to "imported low-value goods and business-to-consumer imported non-digital services" will complement existing GST measures on business-to-business imported services and business-to-consumer imported digital services that took effect from Jan. 1, 2020. The ministry added:
"Together, they ensure a level playing field for our local businesses to be competitive. Overseas suppliers of goods and services will be subject to the same GST treatment as local suppliers.
This change also keeps our GST system resilient in a growing digital economy."
Background on GST hike
The GST hike was first declared in 2018 by then-Finance Minister Heng Swee Keat, and has already been delayed.
In 2020, Heng announced that the GST hike would not take place in 2021, considering revenue, expenditure projections, and the economic outlook.
To cushion the impact of the GST increase on Singaporeans, a S$6.6 billion assurance package was announced during the Budget Statement in 2022.
In November the same year, Deputy Prime Minister Lawrence Wong announced that an additional S$1.4 billion will be topped up to the Assurance Package, meaning it is now worth S$8 billion.
The move is meant to ensure that the package will continue to offset additional GST expenses for the majority of Singaporean households for at least five years, and around 10 years for lower income households, especially accounting for higher inflation in the coming years.
According to The Straits Times, the GST hike, once it is fully in place in 2024, is set to bring in about 0.7 per cent of GDP in revenue annually, which is about S$3.5 billion.
This revenue will go towards supporting healthcare expenditure and taking care of older Singaporeans, Wong said.
To cover additional healthcare spending, changes to personal income tax, property tax and vehicle tax will also come in.
Top images via Unsplash