MOF seeks comments on proposed changes to Goods and Services Tax Act 1993 to effect tax measures announced in 2022 Budget Statement including changes in GST rate

28 June 2022

From 13 June 2022 to 4 July 2022, the Ministry of Finance (“MOF”) is seeking comments on proposed changes to the Goods and Services Tax Act 1993
(“GST Act”) to give effect to measures announced in the 2022 Budget Statement and other changes.

Budget 2022 amendments

The following are the proposed amendments relating to measures announced in the 2022 Budget Statement:

  • 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: It is proposed that, from 1 January 2023, the zero-rating of the services comprising the arranging of the international transport of passengers and related insurance, and the arranging or facilitating of the booking of accommodation will depend on the place of belonging of the contractual person and the person directly benefitting from the services. The supply of these services would therefore only qualify for zero-rating if the services are contractually supplied to a person who belongs outside Singapore, and directly benefits persons who either belong outside Singapore or are GST registered in Singapore.

Other proposed amendments

The draft Bill provides for other proposed amendments to improve GST administration and the clarity of existing legislation:

  • Clarify how the transitional rules in the GST Act are to operate in the event of a change in GST treatment or GST rate.
  • Refine the rules for taxing Low Value Goods (“LVG”) and imported services by way of the Overseas Vendor Registration (OVR) and Reverse Charge (RC) regimes. LVG are goods valued up to S$400 that are imported via air or post. The proposed changes seek to provide tax certainty and ease the compliance burden for businesses, ahead of the introduction of GST on imported LVG and imported non-digital services from overseas suppliers with effect from 1 January 2023.
  • Measures to counter Missing Trader Fraud (“MTF”) schemes: MTF is a fraud scheme 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, changes are proposed to impose criminal sanctions in a two-tier approach from 1 January 2023. 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. Tier 2 offences apply to any person who is a current or former sole-proprietor, partner or director of a business entity that is eventually 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.

The Annex, which can be found on the MOF consultation page, provides a summary of the proposed amendments to the GST Act.

Reference materials

The following materials are available on the MOF website www.mof.gov.sg and the REACH consultation portal www.reach.gov.sg: