Summary of Responses - Public Consultation on Draft Goods and Services Tax (Amendment) Bill 2009

INTRODUCTION

A public consultation exercise was held from 3 to 24 June 2009 to obtain feedback on the draft Goods and Services Tax (Amendment) Bill 2009.

2. The draft Bill covers the following tax changes:

Budget 2009 tax changes:

  1. Zero-rating treatment for all aircrafts used wholly for international travel as well as the sale and lease of aircraft parts forming part of a qualifying aircraft;

  2. GST suspension for goods temporarily removed from Zero-GST or Licensed Warehouses for auctions and exhibitions;

Other tax changes:

  1. GST registration of a trust in the name of the trust (as an alternative to registering in the name of the trustee);

  2. Extension of the current GST treatment for physical vouchers to all forms of vouchers including electronic vouchers; and

  3. Requirement for taxpayers to state their grounds of objection when applying for a review or revision of a decision made by the Comptroller of GST.

3. The summary table lists all the tax changes and explains the amendments to the Goods and Services Tax Act.

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Public Participation in the Consultation Exercise

4. A total of 16 comments on the proposed changes were received from the public. MOF has considered all comments carefully. Of the 16 comments, 9 have been accepted for implementation and will be incorporated into the revised Goods and Services Tax (Amendment) Bill 2009 or IRAS’ e-tax guides, or be studied under IRAS’ periodic review of the GST system. The other 7 comments were not accepted for implementation as they were inconsistent with drafting convention for legislation and the policy objectives of the tax changes.

5. A summary of the key comments received and MOF’s responses to them are as follows:

Zero-rating treatment for all aircrafts used wholly for international travel as well as the sale and lease of aircraft parts forming part of a qualifying aircraft

Comment: Like the qualifying aircrafts, ships are also primarily used for international voyage, thus it would be equitable to extend the zero-rating relief to cover sales and lease of vessel parts that are designed and built for exclusive use on a vessel.

MOF’s response: Accepted for further study. IRAS will be studying the shipping industry as part of its continuing review of the GST system, and will consider if there is similar scope to extend the treatment to ships in subsequent amendments of the GST Act.

 

GST suspension for goods temporarily removed from Zero-GST or Licensed Warehouses for auctions and exhibitions

Comment: The use of the terms “first warehouse” and “second warehouse” is rather unwieldy and confusing; it suggests that the “second warehouse” which is defined as “any warehouse outside the free trade zone” can also include the same warehouse referred to as the “first warehouse”.

MOF’s response: Accepted for implementation. The Goods and Services Tax (Amendment) Bill has been re-drafted to provide clarity that goods removed from a Zero-GST or Licensed Warehouse have to be returned to the same warehouse or any other Zero-GST or Licensed Warehouse.


Extension of the current GST treatment for physical vouchers to all forms of vouchers including electronic vouchers

Comment: As the word “specified” is not defined, this can lead to different interpretations on the types of vouchers that will not fall within the definition of vouchers for GST purposes. It is proposed to define the word “specified” in the Act to provide clarity and incorporate more examples in the draft e-Tax Guide.

MOF’s response: Accepted for implementation. Under section 35A(3), a prescribed voucher is defined as one that can be used to redeem a stated monetary or non-monetary value, without limiting the redemption to specific goods or services. This would include most cash vouchers sold by shopping malls (e.g. a $100 shopping voucher) and stored value cards sold by gaming arcades (e.g. card with 50 gaming credits). No GST is chargeable at the point of sale of prescribed vouchers; GST is chargeable only when the vouchers are redeemed for the consumption of goods or services.

However, if a voucher is for redeeming a specific good or service (e.g. a voucher for a classic manicure worth $30), it will not be a prescribed voucher for GST purposes. This then means that GST is chargeable at the point of sale of such a voucher as this is no different from advance payment for specific goods or services.

The Goods and Services Tax (Amendment) Bill 2009 has been re-drafted for clarity and IRAS will be incorporating more examples in its e-tax guide.


Comment: Section 35A(4)(a) and (b) is intended to exclude vouchers where the monetary and non-monetary value stated thereon make reference to specific goods or services that must be supplied upon redemption of the vouchers. It is proposed that section 35A(4) be simplified by merging sub-paragraphs (a) and (b) as the current drafting appears cumbersome.

MOF’s response: Not accepted for implementation. Although both sections 35A(4)(a) and (b) refer to vouchers that make reference to the specific goods or services for which the vouchers may be used to redeem, they are meant to clarify the circumstances under which they cannot qualify as having value in “monetary” terms and “non-monetary” terms respectively. As they relate to different circumstances, it can be confusing to make this distinction under one section. For legislative clarity, it is better that separate sub-paragraphs of section 35A(4) be maintained.

35A(4)(a) – Vouchers that disqualify as having monetary value
For example, a voucher that states “classic manicure worth $30”. The figure of “$30” stated on the voucher cannot qualify as the monetary value of the voucher for the purposes of section 35A(3). The value of the voucher is the redemption of the classic manicure, which is the specific service ascribed to the voucher. GST is hence chargeable at the point of sale of the voucher as it is no different from advance payment for a classic manicure.

35A(4)(b) – Vouchers that disqualify as having non-monetary value.
For example, a voucher that states “10 sessions of classic manicure”. The figure of “10 sessions” cannot qualify as non-monetary value of the voucher for the purposes of section 35A(3). It is important to note that 10 sessions refer to the number of times a specific goods or service can be redeemed. GST is chargeable at the point of sale of such a voucher offering “10 sessions of classic manicure” as it is no different from advance payment for 10 sessions of that service.

6. MOF would like to thank all respondents for their comments.

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