26 July 2018
On 28 June 2018, the Ministry of Finance (“MOF”) issued a consultation paper and sought feedback on the draft Goods and Services Tax (Amendment) Bill 2018 (“draft Bill”). The consultation closed on 18 July 2018.
GST on imported services
The draft Bill proposes the introduction of goods and services tax (“GST”) on imported services, which was first announced in the 2018 Budget Statement when Minister for Finance Mr Heng Swee Keat stated that GST will be introduced on imported services from 1 January 2020.
The following mechanisms will be introduced to implement GST on imported services:
- A Reverse Charge mechanism for business-to-business (“B2B”) imported services, where the local GST-registered business customer is required to account and pay GST to the Inland Revenue Authority of Singapore (“IRAS”) on the services that it imports. Most GST-registered businesses will not be affected as they can claim a full refund of the GST they incur on their purchases, including imported services. Businesses impacted are primarily financial institutions and residential property developers which do not get such full refund as they make GST-exempt supplies.
- An Overseas Vendor Registration (“OVR”) mode for business-to-consumer (“B2C”) imported services. Overseas suppliers and electronic marketplace operators which make significant supplies of digital services to local consumers are required to register with IRAS. Once GST-registered, they will collect GST on their B2C supplies of digital services and pay it to IRAS.
The draft Bill also incorporates feedback received from the IRAS public consultation on the draft e-Tax Guides on Reverse Charge and OVR, which was conducted from 20 February 2018 to 20 March 2018.
The draft Bill also proposes changes to existing tax policies and administration and changes to strengthen Whole-of-Government law enforcement:
- Enhance IRAS’ powers to investigate specified serious tax crimes: The proposed amendments introduce the power of forced entry, power of arrest without warrant. and power of body search subject to conditions. These powers will be exercised only by trained IRAS investigation officers and where necessary so that investigations are not impeded. IRAS’ powers to gather all information relevant to its investigations from any person will also be expanded.
- Whole-of-Government approach to fight serious crimes: The activities of criminals including syndicates are often multi-faceted. A Whole-of-Government approach is needed to better fight such serious crimes. The draft Bill proposes to allow IRAS to share with law enforcement agencies (‘LEAs”) information that IRAS assesses as critical for investigation or prosecution of serious crimes under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act. Information shared with LEAs is to be disclosed only to prescribed officers in the LEAs. Further disclosure of such information which is not for the purpose of investigation or prosecution will be an offence.
- Counter unauthorised GST collection: It is an offence for a non-GST registered person to issue an invoice or receipt with an amount purported to be GST. The offence is punishable by a penalty and a fine. The draft Bill proposes to protect customers and strengthen deterrence against unauthorised collection of GST by introducing measures such as introducing a custodial sentence where the offence is committed without reasonable excuse or through negligence, and introducing a new offence where a GST-registered business, without reasonable excuse or through negligence, collects more GST than allowed under the Goods and Services Tax Act.
- Extend customer accounting to transactions with the Government: The draft Bill proposes to extend customer accounting to transactions with the Government. This will ease businesses compliance as GST-registered suppliers will not need to differentiate their transactions with the Government and with GST-registered customers. Under customer accounting, the GST-registered supplier will not collect GST from a GST-registered customer. Instead, the customer will self-account for the GST to IRAS directly. This prevents fraud caused by the supplier absconding after collecting GST from customers.
The following materials are available on the MOF website www.mof.gov.sg:
- MOF press release
- Draft Goods and Services Tax (Amendment) Bill 2018
- Comparative amendments to Goods and Services Tax Act
- Summary Table on Proposed Changes to the Goods and Services Tax Act
- Draft Goods and Services Tax (General) (Amendment) Regulations 2018