Announced in Budget 2021, the Singapore Government announced their plans to extend the taxing of GST to low-value goods and imported remote services through the overseas vendor registration from 2023 onwards. This is to achieve equalness in GST whether the services or goods are supplied locally or overseas.
This means that businesses need to be aware of the changes or they might face unwanted consequences. This article offers a brief summary of the changes businesses should be aware of.
1. Extension of Overseas Vendor Registration (OVR)
Introduced in the beginning of 2020, the OVR was implemented to address the difference in GST treatment of services, local and overseas, consumed in Singapore. Overseas digital services needed to register under the OVR if their yearly turnover exceeded S$1 million and local B2C exceeded S$100,000. Such digital services include downloadable digital content, streaming services, and software downloads.
Come 2023, the OVR will be extended to every B2C services, digital and non-digital, regardless of value, especially services that are consumed and supplied remotely. This will eliminate the difficulty OVR vendor face in the past having to differentiate between digital and non-digital services. Remote services include educational, online personal, and advisory consultation services. On-site services such as hairdressing, catering and transport which requires the recipient to be physically present is excluded from the OVR.
2. Low-value goods (LVG) tax
Excluding goods liable to customs, any air or post imported goods are not subjected to GST if the Cost, Insurance and Freight (CIF) value is below S$400. However, if the CIF value exceeds S$400, there is an implementation of 7% GST to the entire value. The CIF value includes sales value plus any additional cost such as transportation and insurance and Singapore Customs dutiable payment.
3. Businesses’ impacts
Currently, imported goods that are brought in from overseas are not considered within the scope of GST. Any liability brought about GST falls on the customer who places the order. If value of import is less than S$400, and imported through postage, GST will not be implemented.
Come 1 January 2023, if you are a non-GST registered business who is expecting shipment of LVG, the supplier is subjected to 7% GST. However, if you are a GST-registered business expecting shipment of LVG, the supplier is not subjected to GST charge. The business must however provide their GST registration number to the supplier, as it is their responsibility to pay the GST. This implementation affects not only local suppliers who imports overseas goods, but also electronic marketplaces and redeliverers services.
These changes in GST will certainly bring forth new challenges to both businesses in and out of Singapore. As the country’s purchasing habits transits increasingly towards online, business must make changes to their current process to better identify, capture, and charge GST on supplies of LVG.
If you are curious about how these GST changes may affect your business and want to prepare ahead of time, do not hesitate to get expert help from Max Lewis Consultants Pte Ltd. Our GST assisted self-help kits in Singapore will help you meet all the GST-related needs of your businesses.
On top of GST compliance, we also offer other services that enhance and expand your business operations, including local and international tax planning, transfer pricing advisory, and asset and business valuation services in Singapore. Contact us today to learn more about our highly trusted services if you wish to know more.