Singapore will increase its GST from 7% to 9%

GST to increase over the next two years

In Singapore, the goods and services tax (GST) rate will increase from 7% to 9% in 2 stages:

• From 1 January 2023 – 7% to 8%
• From 1 January 2024 – 8% to 9%

The initial S$6 billion Assurance Package, which was announced in the year 2020, will cushion the GST hike impact. There will be an additional injection of S$640 million, totalling S$6.6 billion, said Finance Minister Mr Lawrence Wong in the Budget speech on 18 February 2022.

Business supplies are subject to GST based on the prevailing GST rate, determined in accordance with the general time of supply rule, that is, the time of supply is the earliest of the time of invoice or payment. When a supply extends across the change in GST rate (e.g., 1 January 2023 or 1 January 2024, as the case may be), the transitional rules may apply and may impact the GST rate applicable to the supply.

Supply of goods and services that straddle the transition from 7% to 8% GST rate

Your standard-rated supplies have one or more of the following events that will take place on or around 1 January 2023:

1. Invoices are issued to customers – the date of tax invoice.
2. Once the payment has been received – the date of payment.
3. Goods are delivered or services are performed.

You must apply the time of supply rules to each transaction to determine when the supply has occurred. 

Scenario 1: When payment for goods or services is received by the supplier prior to 1 January 2023, the GST rate will be 7% regardless of when the goods or services are delivered.

Scenario 2: When you receive the tax invoice, receive goods or consume the services before 1 January 2023, GST will be at 7% irrespective of when you make payment for the goods and/or services.

Scenario 3: GST will be charged at 8% if you make full payment and receive the goods or services after 1 January 2023. This is regardless of when the invoice was issued. It is the supplier’s obligation to issue a credit note to cancel the original tax invoice and issue a new tax invoice reflecting the GST at 8%.

Scenario 4: Should the supplier accepts payment in advance for the goods and services you purchase, and full payment is received by the supplier before 1 January 2023, GST will be charged at 7%. You should contact your supplier for information regarding the terms and conditions related to advance payments.

You can use this tool to determine whether a business is GST registered in Singapore – IRAS GST Registered Business Search. 

Generate revenue to support healthcare and social expenditures

In 2024, when the Government implement the full hike, the GST hike will generate about 0.7% of the gross domestic product in revenue. This will bring a total of about S$3.5 billion in revenue.

As part of the spending increase, the money will support healthcare expenditures and care for our senior citizens, along with other areas of social expenditure. 

The GST revenue by itself will not be able to cover all of the additional healthcare costs. As such, Singapore needs not only an increase in GST and also a change in the personal income tax, property tax and vehicle tax.

Specifically, Mr Wong has also carefully considered the overall situation in Singapore especially the ongoing COVID-19 pandemic, the state of the economy, and the outlook for inflation.

Concerns over GST hike

At the same time, Mr Wong understands the concerns that Singaporeans have about the GST increase taking place at the same time as rising prices. The publicly funded healthcare and education will continue to absorb GST. He reassures all Singaporeans that the Government will implement GST in our own unique way as Singaporeans, with the inclusion of features and schemes that help the less well-off.

The Government planned to increase the GST by 2 percentage points from 7% to 9% in 2018. The increase was delayed due to the pandemic of COVID-19. Mr Wong will also provide town councils with S$15 million more each year so they can absorb the additional GST on service and conservancy charges that will become payable in the near future. 

Government fees and charges will not increase for a year

There will be no increase in the fee for government fees and charges for a year starting on 1 January 2023. It will apply to fees associated with licences such as driving licences – as well as fees charged by government agencies for the provision of services. It also includes charges for school fees such as Institute of Technical Education and Polytechnic fees, as well as those for public parking facilities. The above is not applicable to fees that are determined by other entities not affiliated with the government, such as universities or electronic road pricing charges. 

A Committee against Profiteering will be setup

The Minister of State for Trade and Industry Low Yen Ling will chair the Anti-Profiteering committee. This will address the concerns that businesses might be using GST as a cover to raise prices.

Over the next 5 years, the enhanced Assurance Package – consisting of seven components – will release payouts to Singaporeans. The Government estimate that the offsets from the GST package will cover up to five years of additional GST expenses for a majority of households in Singapore, Mr Wong said. 

In the case of lower-income households that receive fewer benefits, the offsets will cover about 10 years of benefits, he said. Aside from the cash payouts, the package will also include additional U-Save rebates for utilities and MediSave top-ups, among others.

Speak with GST Team

If you would like to learn more about GST services, please submit your contact details through Submit Enquiry. A GST representative will contact you to discuss your concerns.