GST Rate Hike in Singapore and Its Impact on Consumers and Businesses

Starting Jan. 1, the Singapore government will implement a higher rate, from 7% to 8%, for its Goods and Sales Tax (GST). This increase is part of the two scheduled hikes in the GST, as indicated in the 2022 state budget unveiled on Feb. 18. The second increase, from 8% to 9%, will be effective on Jan. 1, 2024.

What Exactly is GST and How Does it Work?

GST is a value-added tax consumption imposed on imported goods which is responsibly collected by Singapore Customs.

Similar with other taxes, GST exempts the “provision of most financial services, the supply of digital payment tokens, the sale and lease of residential properties, and the importation and local supply of investment precious metals.” To learn more about the taxable and non-taxable goods and services as well as standard- and zero-rated supplies, click here.

What is the Reason for the Increase in GST Rate?

The Ministry of Finance reported that social spending escalated from S$20 billion to S$37 billion between 2010-2019.

At present, social spending has become the highest government expenditure annually, particularly in the health care industry, due to the rapid ageing population of Singapore. To improve the quality, accessibility, and affordability, the government increased the GST rate in order to finance the construction of additional hospitals and clinics, as well as providing medication subsidies to the elderly.

By 2030, it is expected that one in four citizens will be considered seniors aged 65 and above.

How Does GST Rate Hike Affects Consumers

The two-point hike in GST rate will affect “low-value goods” purchased outside Singapore or via online shopping platforms. Travellers carrying goods from overseas during travel are subjected to GST import relief, while those items with retail value less than S$400 are exempted from GST.

For more information, the Inland Revenue Authority of Singapore (IRAS) has released a guide for GST rate change for consumers. This consists of the rate chargeable to their purchases, reporting wrong GST practices of businesses, reporting unjustified price increases using GST as cover, and Assurance Package for GST.

Non-GST and GST-registered Businesses Preparations

Increases in the GST have a significant impact on GST-registered businesses as they are required to update their systems used in issuing invoices and accounting (including payment and receipt of goods or services).

Despite the rising inflation in the city-state, GST-registered businesses must also inform their customers regarding the updated rates accordingly and the government will proceed as planned. To apply and be familiar with GST registration, visit this link. You may also watch the video below: 

Non-GST registered businesses, on the other hand, will feel the pinch of rate hike from the products and services they acquired from GST-registered suppliers.

To mitigate the additional business costs, you may apply for GST registration voluntarily for two years to recover GST-incurred expenses. To know the qualifications and conditions for voluntary registration, as well as its benefits and costs, read here. You may also watch the video below: 

The GST Assurance Package

To cushion the impact of the GST rate hike for Singapore citizens, the government announced the GST Assurance Package during the Unity Budget 2020. The enhanced GST Assurance Package introduced some measures which include the following:

• Every adult Singaporean will receive cash payouts totalling S$700-S$1,600.
• Eligible seniors will receive a special GSTV – Cash (Seniors’ Bonus) totalling S$600- S$900.
• Eligible HDB households will receive additional U-Save rebates totalling S$330-S$570 depending on flat type.
• All Singaporean children and seniors will receive MediSave top-ups totalling S$450.
• All Singaporean households will receive two tranches of CDC vouchers worth S$200 each in 2023 and 2024. The vouchers can be used at all participating heartland merchants and hawkers, as well as major supermarkets.
• Grants of S$12 million will be provided to Self-Help Groups (CDAC, Yayasan Mendaki, SINDA, Eurasian Association) over four years.
• S$5m top-up to Citizens’ Consultative Committee ComCare Fund (CCF) over five years to further support vulnerable households.