GST to be levied on imported low-value goods
Effective 1 January 2023, private consumers in Singapore will be required to pay 7% goods and services tax (GST) on goods valued at SGD 400 or below (low-value goods or LVG) that are imported into Singapore via air or post (the GST rate will rise to 9% sometime between 2022 to 2025).
Currently, LVG procured in Singapore are subject to GST, while the same goods procured from overseas and imported via air or post are not. The Finance Minister announced in Budget 2018 that, effective 1 January 2020, GST applies to business-to-consumer (B2C) imported digital services by way of the overseas vendor registration (OVR) regime. It was further announced in Budget 2021 that GST will be applied to imported LVG and imported non-digital services in respect of B2C transactions by extending the OVR regime with effect from 1 January 2023. Thus, all B2C supplies of imported services—whether digital or non-digital—that can be supplied and received remotely (i.e., known as “remote services”) will be taxed. This will achieve parity in GST treatment for all LVG consumed in Singapore regardless of whether they are procured from overseas or locally. No changes are being made to the GST treatment of goods imported via sea or land or for goods valued above SGD 400 that are imported via air or post.
The Inland Revenue Authority of Singapore (IRAS) released an e-tax guide, “GST: Taxing imported low-value goods by way of the overseas vendor registration regime (First Edition),” on 30 July 2021, which defines LVG as goods that at the point of sale:
- are not dutiable goods, or are dutiable goods, but payment of customs duty or excise duty on the goods is waived under section 11 of the Customs Act;
- are not exempt from GST;
- are located outside Singapore and are to be delivered to Singapore via air or post; and
- have a value not exceeding the import relief threshold of SGD 400.
Persons affected by the extended OVR regime on LVG
The following persons will be affected by the new rules on LVG:
- A local or overseas suppliers making sales of LVG to customers in Singapore;
- A local or overseas operator of an electronic marketplace supplying LVG to Singapore on behalf of local and overseas suppliers through its marketplace;
- A local or overseas re-deliverer delivering or facilitating the delivery of LVG to Singapore by providing or facilitating the purchase or use of an address outside Singapore;
- A transporter (e.g., air express courier, air courier, forwarding company) providing transportation and import clearance services for LVG delivered to recipients in Singapore; or
- A customer in Singapore making purchases of LVG from suppliers and electronic marketplaces, or through re-deliverers.
An overseas vendor (i.e., supplier, electronic marketplace operator or re-deliverer) will be liable for GST registration on a retroactive or prospective basis as follows:
Retrospective basis: Where the global turnover and value of B2C supplies of LVG and remote services made to non-GST-registered customers in Singapore exceed SGD 1 million and SGD 100,000 respectively, at the end of any calendar year. If the global turnover or value does not exceed these thresholds and this can be substantiated by documentation, the supplier is not required to register for GST.
- Prospective basis: Where the value of global turnover and B2C supplies of LVG and remote services made to non-GST-registered customers in Singapore is expected to exceed SGD 1 million and SGD 100,000 respectively, for the next 12 months.
To ease the compliance burden, an overseas OVR vendor that must be registered for GST in Singapore will be registered under a simplified pay-only regime, although the vendor may apply for GST registration under the full regime so that it can claim input tax if it incurs significant GST from GST-registered suppliers in Singapore.
Action for overseas vendors affected by the changes
Overseas vendors making B2C supplies of LVG and remote services to non-GST-registered customers in Singapore should ascertain whether the impending changes will give rise to a GST registration liability in Singapore under the extended OVR regime. This should also apply to overseas vendors that previously concluded that their service offerings are non-digital services and, hence, are not liable for GST registration in Singapore.
Although the effective date of the new rules is just under a year away, affected overseas vendors should begin now to assess whether system enhancements will be needed to put in place processes and controls for the collection and reporting of GST to IRAS once the vendor has registered for GST purposes in Singapore.
Eu Chin Sien
Ng Shy Zing