Indirect Tax News - April 2022

GST increase postponed and will be phased in

Singapore’s minister for finance announced in the 2022 budget that a two percentage point increase in the GST rate increase will take place in two stages from 7% to 8% on 1 January 2023, and from 8% to 9% on 1 January 2024 rather than in 2022 (for an analysis of the budget measures, see the tax alert dated 2 March 2022). In addition, changes will be made to the zero-rating of travel arranging services.

Currently, services for arranging the international transport of passengers (as well as insurance relating to international transportation) are zero-rated; services for arranging local accommodation are subject to the normal GST rate, but arranging accommodation outside Singapore is zero-rated. As from 1 January 2023, zero-rating will apply if the services are contractually supplied to an overseas customer and they directly benefit an overseas person or a GST-registered person. Travel arranging services to Singapore customers will be subject to the standard GST rate.

Readers also should be reminded that as from 1 January 2023, recipients in Singapore will be required to pay 8% GST on goods valued at SGD 400 or below (i.e., known as “low-value goods” or “LVG”) that are imported into Singapore via air or post (for prior coverage, see the article in the January 2022 issue of Indirect Tax News), and remote services procured from overseas service provider (for prior coverage, see the article in the October 2021 issue of Indirect Tax News). This will achieve parity in GST treatment for goods and/ or services consumed in Singapore regardless of whether they are procured overseas or locally.

Eu Chin Sien