30 January 2023
Changes to the Goods and Services Tax Act 1993 (“Act”) pursuant to the Goods and Services Tax (Amendment) Act 2022 have come into force on various dates. Aside from changes in the rate of goods and services tax (“GST”), other changes include an update to the GST treatment for the supply of travel arranging services, refining the rules for taxing low-value goods (“LVG”), and measures to counter missing trader fraud (“MTF”) schemes.
The following is a brief summary of these changes:
- Change in GST rate: From 1 January 2023, the GST rate has increased from 7% to 8% and will increase from 8% to 9% from 1 January 2024.
- Update GST treatment for supply of travel arranging services: The term “travel arranging services” refer to services which facilitate the booking and payment of the underlying travel product(s) (e.g. international transport of passengers and travel accommodation). Such services can be provided via the Internet or through non-digital means (e.g. walk-in or over the telephone). From 1 January 2023, the basis for determining whether zero-rating applies to a supply of travel arranging services will be based on where the customer and direct beneficiary of the services belong. Specifically, zero-rating will apply if the services are contractually supplied to an overseas person and directly benefiting an overseas person or a GST-registered person in Singapore. If the customer belongs in Singapore, the supply of travel arranging services will be standard-rated. This change will ensure that the GST rules accurately reflect the place of consumption of travel arranging services and parity in GST treatment between the local and overseas suppliers on their supplies of such travel arranging services. For more information, please refer to the GST: Guide for the Travel Industry (First Edition) published by the Inland Revenue Authority of Singapore (“IRAS”).
- Clarify how the transitional rules in the Act are to operate in the event of a change in GST treatment or GST rate.
- Refine rules for taxing LVG:LVG are goods valued up to S$400 that are imported via air or post. From 1 January 2023, GST will also apply on LVG which are imported into Singapore via air or post and purchased from GST-registered suppliers.
- Measures to counter MTF schemes: With effect from 1 January 2023, new section 62C of the Act implements measures to counter MTF schemes. MTF schemes are schemes used by syndicates where the seller absconds with GST collected on sales without paying the GST to IRAS, while businesses further down the MTF chain continue to claim refunds on input GST paid on their purchases from IRAS. 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 current or former sole-proprietors, partners or directors of business entities that are used in an 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.