A respondent commented that fees for advance rulings should be waived as it does not appear fair for GST registered persons to pay for written advice in order to clarify the collection of GST on behalf of the Government. Another respondent suggested that the Comptroller allocates “points” to GST-registered businesses based on the amount of output tax collected and allow the GST registered businesses to use points to offset the fees charged for the advance rulings

MOF’s response: With the charging of fees for advance rulings, the Comptroller expects to devote more resources for the advance rulings system as ruling requests are likely to be more complex and specific to the company. Generally, GST-registered businesses would seek rulings because they wanted absolute certainty on the GST treatment before entering into contractual agreements for goods or services, despite the publication of guidelines on the GST treatment by the Comptroller. Their reason is because they do not wish to bear the risks of any irrecoverable GST should their interpretation is at variance with that of the Comptroller given that contracted value for goods or services are non-negotiable after conclusion. Hence it is fair for the Comptroller to charge a fee for the advance rulings system which is based on cost recovery of the resources used in issuing a ruling which benefits only the applicant. With the fee, the GST ruling is legally binding on IRAS.

The imposition of fees would deter frivolous requests. If rulings are free, the Comptroller will be inundated with applications as most taxpayers would prefer free legally binding rulings over free informal advice. The fees therefore protect the interests of those taxpayers who genuinely have a need for advance rulings. The fees are also significantly lower than the charges of professional legal firms and accounting firms.

For normal enquiries, taxpayers can still continue to seek clarifications from e-tax guides published by the Comptroller. To-date, IRAS has published 61 e-tax guides on their website clarifying GST treatments on various transactions. IRAS will also be translating some of the common scenarios ruled for publication in their e-tax guides. Alternatively, taxpayers may also seek advice through other channels e.g. letters, emails, hotline etc. Such informal advice given by the Comptroller is free, though it is not a legally binding ruling.

For the above reasons, the suggestions to waive the fees for GST rulings are not accepted.

There were a number of comments from Respondents seeking clarifications on the circumstances in which the Comptroller shall/may not give an advance ruling, the service standards, the appeal process and the fee structure.

MOF’s response: Accepted as feedback. IRAS will clarify the abovementioned in their e-tax guide.

A respondent suggested that paragraph 1(c) of Part II of the Fifth Schedule should be amended to clarify that the additional fee for advance rulings is inclusive of tax.

MOF’s response: Accepted. The additional fee for advance rulings is inclusive of tax. The draft GST (Amendment) Bill will be amended accordingly.

A respondent highlighted that as taxpayers will have difficulties in complying with the requirement in paragraph 17 of the Fifth Schedule to disclose the existence of a ruling in the GST return as current returns do not have boxes for taxpayers to make such a disclosure.

MOF’s response: Accepted. The Comptroller will provide a form for the taxpayer to notify the Comptroller on whether he has applied the Ruling in completing his return. The form will specify the information required. The draft GST (Amendment) Bill will be amended to provide for this.

2. Aligning the GST treatment of Islamic financing arrangements with the GST treatment of conventional financing arrangements that they are economically equivalent to

A respondent highlighted that it is unclear in the definition of “non-residential property” as to whether it would include shop houses and mixed developments. He suggested that definition be amended to clarify this.

MOF’s response: Not accepted. For mixed development and shophouses, paragraph 2 of the Fourth Schedule is applicable only to the part of the land/building that is approved for residential purposes. Hence the definition on "non-residential property" will be applicable only to the part of the land/building that is approved for non-residential purposes. IRAS will clarify the definition of “non-residential property” in their e-tax guide.

The definition of “qualifying Islamic financial arrangement” states that the financial institution must immediately sell or lease the non-residential property to the purchaser. A respondent suggested that the definition be amended to include a time frame as the word “immediately” is ambiguous and subject to interpretation.

MOF’s response: Not accepted. Under a qualifying Islamic financial arrangement, the contract for sale of property to the financial institution and the contract for subsequent sale/lease of property back to the seller should be entered into simultaneously. It will be inconsistent with the policy intent if a time frame is included in the definition as suggested by respondent.

Respondents suggested that the GST Act be amended to enable financial institutions to claim full input tax on the purchase of non-residential properties in qualifying Islamic financial arrangements.

MOF’s responses: Accepted as feedback. It is not necessary to amend the Act to provide for full input tax recovery on the purchase of a non-residential property in a qualifying Islamic financial arrangement. Currently, Regulation 30(1) already allows the Comptroller to grant full input tax recovery on purchase of such goods. Only contracts relating to such an Arrangement entered into on or after 17 February 2006 will qualify for this concession. IRAS will clarify this in their e-tax guide.

3. Allowing insurers input tax claims based on the tax fraction of cash payments paid to qualifying policyholders under insurance contracts that are subject to GST

A respondent suggested that section 29 should clarify whether the deemed input tax is regarded as input tax directly attributable to taxable supplies or a residual input tax.

MOF’s response: Accepted as feedback. It is not necessary to amend the draft provisions as whether input tax is directly attributable to taxable supply or is residual in nature is a question of fact. In principle, the deemed input tax will be attributed directly to taxable supplies if the cash payments are made in respect of insurance policies which are taxable. IRAS will provide clarifications in their e-tax guide.

4. Revising the record-keeping period from the current 7 years to 5 years

Respondents highlighted that in line with the reduction of record-keeping period, the time limit under regulations 37, 38, 39, 56, 75 and 83 of the GST (General) Regulations should similarly be reduced to 5 years.

MOF’s response: Accepted as feedback. The subsidiary legislation will be amended accordingly.

5. Implementing revised GST rules for zero-rating of advertising services

A respondent commented that whether section 21(3)(e) and (f) should be amended to exclude supplies of advertising services given the change in policy intent to apply zero-rating based on the nature of the advertising services, and not based on the location of the advertised goods or land.

MOF’s response: Accepted. The amendments will be made to the draft GST (Amendment) Bill to reflect the change in policy.