In an effort to make a push towards buying local, the government plans to make certain changes and extensions when it comes to the GST (Goods and Services Tax). However, because of the current economic challenges, these plans have been postponed and will most like likely not happen anytime this year. Nonetheless, even though there is still no particular date when the GST rate will rise, the changes are definitely expected to occur in the near future.
Considering the dire need of the government to bolster its revenue in order to fund the enormous expenditure for healthcare, experts advise consumers and businesses to expect the changes to occur sometime between 2022 to 2025 so that they can prepare for the upcoming updates.
In line with this, briefly discussed below are some of the most important things that can be expected from the upcoming GST changes.
Increase in GST
During Budget 2018, an announcement was made by the government that plans were underway to raise the GST rate from 7% to 9% during the period between 2021 and 2025. However, as said, the increase in GST will not occur in 2021, and most likely will not happen in 2022 either as GST-registered business require the lead time to prepare for the increase.
The new change will mostly take place in 2023 and 2024, but will depend on the economic outlook during that period of time. In the meantime, businesses can start preparing for the upcoming changes.
Measures businesses can take for the GST rate change
GST registered businesses may start to:
- Conduct an assessment of their contracts with suppliers and customers to ascertain who will need to shoulder the GST rate increase.
- Make a review of the changes needed to be implemented to their processes and systems when an increase in GST rate occurs.
- Take GST cashflow relief schemes into consideration for imports including Approved Contract Manufacturer, Major Exporter Scheme, Import GST Deferment Scheme, and Trader Scheme.
Non-GST registered businesses may start to:
Take the pros and cons of a GST registration into consideration as well as the suitable timing to submit an application for a GST registration.
Expected extension of the rules on GST
From January 1, 2023, the Singapore government plans to expand GST to cover low-value products that are imported through air, sea, or land and are valued at $400 and higher. Those imported services that are non-digital as well as those low-value products that are sold online by overseas vendors to Singapore will also be included in the scope if these products will be brought into the country. The purpose of these changes is to even the market foothold of the vendors both here and abroad.
Moreover, the changes in the rules on the GST will also most likely affect B2C (Business to Consumer) non-digital services that are imported here. If a broad definition is to be applied to “non-digital” services beyond e-commerce enterprises, companies abroad that supply services and low-value products to the local consumers of Singapore may also soon face additional compliance obligations in the country.
Possible implications of the extension
The extension of the rules on the GST can have varying implications for both the consumers and the businesses. In terms of the consumers, the extension will only mean that there will be and end or a high-degree restriction to online shopping that enjoys freedom from GST. Because imported goods brought via air, sea, or land or valued above S$400 will already be subjected to GST, this will effectively impose GST on all online purchases from overseas vendors.
For the local businesses, on the other hand, not much impact will be felt once the changes in the rules have been implemented unless they operate in sectors like real estate, non-profit-making organisations, and finance. A business belonging to these sectors cannot usually completely recuperate its input GST. Hence, it may need to take into account the reverse charges on low-value commodities besides those on imported services. Alternatively, if unsure how to execute accordingly, there may be a need to seek an expert for the updated GST-related matters to benefit from the various GST schemes and avoid errors.
For overseas businesses that cater to the Singapore consumers, it is highly advised for them to consider and examine if the upcoming rules will affect them. This is especially necessary since the rules are seen to potentially have an expansive reach. Every affected business should prepare early, especially when it comes to fulfilling their compliance duties and registration requirements.
The changes on the GST rules will surely bring about various implications not just for businesses but also for the consumers. For this reason, local and overseas companies should review and reevaluate certain aspects of their businesses now in order to avoid any type of losses. Early preparation is the key to adapting easily and profitably to any kinds of changes. If you are in need of assistance regarding your GST, you can reach out to us as we provide GST Assisted Self Help Kit for businesses.
Furthermore, we at Max Lewis Consultants Pte Ltd also deliver a wide range of other services you need to upscale your business operations, including transfer pricing advisory, business and asset valuation in Singapore, valuation of intellectual property rights, and many others. Do not hesitate to contact us today, so that we can assist you in the growth of your business.