Bill to amend Goods and Services Tax Act 1993 passed to implement new GST rates and other changes

29 November 2022

On 7 November 2022, the Goods and Services Tax (Amendment) Bill (“Bill”) was passed. The Bill will amend the Goods and Services Tax Act 1993 to make changes including the following:

  • Change in GST rate from 7% to 8% from 1 January 2023, and from 8% to 9% from 1 January 2024.
  • Update GST treatment for supply of travel arranging services: Currently, the basis for determining whether a supply of travel arranging services is zero-rated or standard-rated depends on factors like the location of the accommodation, or whether the transportation being arranged is international in nature. From 1 January 2023, the GST treatment for a supply of travel arranging services will be based on where the person who contracts for the service and where the person who directly benefits from the service belong. For example, if the contractual customer of the service belongs in Singapore, then GST will be charged at the standard rate. This amendment will also ensure consistent GST treatment for travel arranging services, regardless of whether they are rendered by local or overseas providers.
  • Clarify how the transitional rules in the GST Act are to operate: Transitional rules, in the event of a change in GST treatment or GST rate, are addressed in a new Part 6A. The amendments provide greater clarity in the application of the rules, particularly for more unique supplies made, such as supplies which spans both a change in GST rate and the effective date of GST registration of a business.
  • Refine rules for taxing low-value goods and imported services under the Overseas Vendor Registration and Reverse Charge regimes: Low value goods are goods valued up to S$400 that are imported via air or post. When in force, the changes will prevent double taxation, provide tax certainty and ease the compliance burden for businesses, ahead of the introduction of GST on imported low value goods and imported non-digital services from overseas suppliers with effect from 1 January 2023.
  • Measures to counter Missing Trader Fraud schemes: Missing Trader Fraud (“MTF”) schemes are schemes used by syndicates where the seller absconds with GST he collected on his sales without paying the GST over to the Inland Revenue Authority of Singapore (“IRAS”), while businesses further down the MTF chain continue to claim refunds on input GST paid on their purchases from IRAS. To provide strong deterrence against such schemes, criminal sanctions will be imposed under a two-tier approach.
    • Tier 1 offences deal with the more culpable persons such as masterminds and co-conspirators who devise and/or direct such fraud schemes, as well as syndicate members who know they are participating in a fraudulent scheme. This offence carries a maximum imprisonment term of 10 years and/or maximum fine of S$500,000. This is a step up from the maximum imprisonment term of seven years for the offence of fraudulent trading, which such offenders are currently prosecuted under, and is intended to convey a strong deterrence message.
    • Tier 2 offences apply to current or former sole-proprietors, partners or directors of business entities that are used in a MTF arrangement. Tier 2 offences target persons such as nominee directors who are typically recruited into such schemes to incorporate entities which are then used by syndicates for fraudulent purposes. This offence carries a maximum imprisonment term of one year and/or maximum fine of S$50,000.
  • Empower Comptroller of Goods and Services Tax to extend GST filing deadlines: This amendment will give the Comptroller the flexibility and authority to administer the GST regime efficiently, by extending the deadline for filing GST returns where necessary, such as during the Covid-19 pandemic. A similar amendment was made under the Income Tax (Amendment) Act 2022 to empower the Comptroller of Income Tax to extend all filing deadlines in the Income Tax Act.

Reference materials

The following materials are available from Singapore Statutes Online sso.agc.gov.sg and the Singapore Parliament website www.parliament.gov.sg: