Impending changes to GST rules

On 16 February 2021, the Finance Minister delivered the Budget 2021 Statement. The Finance Minister has reaffirmed that the GST hike from 7% to 9% will not take place this year; it will be postponed to sometime between 2023 and 2025. The following are some of the GST changes that will be made within the next two years:

GST will be applied to low-value goods imported via air or post;
GST will be applied to Business-to-Consumer (B2C) transactions involving imported non-digital services through Overseas Vendor Registration and the Reverse Charge regimes; and
The basis for determining the zero-rating of media space will be changed.

GST extended to goods imported via air or post for low-value goods

Low-value goods are goods valued up to and including the current GST import relief threshold of SGD 400. Currently, low-value goods imported via air or post are not subject to GST. Beginning 1 January 2023 there will be no GST relief for importation of low-value goods.

Who is affected?

The following will be impacted by the extension of GST to imported goods:

End consumers in Singapore that buy goods from overseas suppliers.
Overseas businesses selling goods to Singapore customers.
Local/overseas businesses in the postal and logistics industry that import low-value goods into Singapore.

GST extended to Business-to-Consumer imported non-digital services through the Overseas Vendor Registration and Reverse Charge regimes

The supply of digital services from overseas GST registered suppliers to non-GST registered person(s) in Singapore is subject to GST under the Overseas Vendor Registration regime. Procurement of digital services from overseas GST registered suppliers by GST registered person(s) in Singapore is subject to GST under the Reverse Charge mechanism. However, B2C imported non-digital services (such as live interactions with overseas providers of educational learning) are not subject to GST.

Beginning 1 January 2023 imported non-digital services will also be subject to GST under the Overseas Vendor Registration regime and the Reverse Charge regime. The Singapore Tax Authority will release details after consultation with industry.

Who is affected?

The following will be impacted by the extension of GST to imported non-digital services:

Businesses and individuals procuring services from overseas service providers.
Overseas service providers providing services to non-GST registered customers (businesses and individuals) in Singapore.

Change in basis for determining the zero-rating of media space

Currently, under Section 21(3)(u) of the GST Act, the provision of media sales (for example, sale of advertising space for hardcopy print and outdoor advertisement) qualifies for zero-rating if the place of circulation of the advertisement is wholly or substantially (in other words, at least 51%) outside Singapore.

Beginning 1 January 2022, whether zero-rating applies to a supply of media sales will be based on the place where the customer (in other words, the contractual customer) and direct beneficiary of the service are.

Who is affected?

The following are impacted by the change in determining the basis for zero-rating:

Advertising agencies/media owners supplying media space to customers.

Chin Sien Eu
chinsien@bdo.com.sg

Jackson Cai
jacksoncai@bdo.com.sg