Singapore is set to hike its goods and services tax in January. Here's how it will work

Singapore's goods and services tax will be raised to 8% in January 2023.
Ore Huiying | Bloomberg | Getty Images

Come Jan. 1, Singapore will raise its goods and services tax, otherwise known as the GST, from 7% to 8%. It's the first of two scheduled hikes of the GST, with the second slated to take place in January 2024, when the GST will be raised from 8% to 9%.

The GST is a consumption tax imposed on nearly all goods and services in Singapore. Starting Jan. 1, 2023, GST will be imposed on imported low-value goods valued up to S$400. Currently, only imported goods valued above S$400 are subjected to the GST. With the change, all goods and services imported into Singapore, including imported goods purchased online, will be subject to the tax.

Businesses based in Singapore with an annual turnover exceeding S$1 million (US$742,000) are required to register for GST and charge GST on all taxable goods at the prevailing rate.

Singapore's Parliament passed the bill to amend the GST in November, despite members of parliament from Singapore's opposition parties coming out against the hike, citing poor timing amid inflationary pressures.

Inflation rate in Singapore hit a 14-year high of 7.5% in August. Inflation has eased slightly in recent months, with November's annual inflation rate at 6.7%, but that's significantly higher than the 2% inflation that the country's central bank recommends for overall price stability.

Who will be affected most?

Business sectors and price-sensitivity

Ride-hailing services in Singapore are split in their responses to the GST hike. Grab will pass on the increased GST tax to its private-hire drivers, forcing them to absorb the additional cost, according to The Straits Times. Other ride-hailing services including Ryde told The Straits Times that commission fees will remain the same.

Grab and Ryde did not immediately respond to CNBC requests for comment.

Ride-hailing firm ComfortDelGro told CNBC that the company will extend its daily rental waiver of 15% until March 31, 2023 to help its drivers cope with the rising cost of living. Its commission fees will remain unchanged.

Most businesses should not be significantly affected by the hike, but charities and non-profit organizations may be, because they can't claim the GST incurred for free non-business activities, such as free medical services, said Ajay Kumar Sanganeria, partner at accounting firm KPMG.

A spike in purchases of big-ticket items is expected prior to the implementation of each GST hike, he added. Customers make purchases such as furniture and cars ahead of new taxes to avoid paying the added cost, Sanganeria said.

Why now?

How Singapore compares with other countries

After the two-step rate hike to 9% from Jan. 1 2024, Singapore's GST rate will remain one of the lowest in Asia-Pacific, said Chew Boon Choo, partner of Indirect Tax at consulting firm Ernst & Young Solutions.

As of January of this year, most Asia-Pacific countries had a goods and services tax of more than 7%.

China's goods and services tax is 13%. The Philippines and Vietnam have a goods and services tax rate of 12% and 10%, respectively.

Taiwan has the region's lowest goods and services tax at 5%, according to EY.

Other countries in the region have raised their goods and services taxes recently. Indonesia, which raised its rate from 10% to 11% from April of this year, plans to go to 12% by Jan. 1 2025. Japan's consumption tax rate is now 10%, up from 8% before October 2019.

In August 2021, the Thai Cabinet approved the extension of the reduced Value Added Tax (VAT) rate of 7% for another two years in light of economic pressures caused by the Covid-19 pandemic. The VAT rate will revert to 10% late next year if there is no further extension.


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