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Second Reading Speech by Lee Hsien Loong, The Deputy Prime Minister and Minister for Finance on The Goods And Services Tax (Amendment) Bill 2002 at The Parliament, 5 Dec 2002

04 Dec 2002

1. Mr Speaker, Sir, I beg to move, "That the Bill be now read a second time".

2. The Bill will amend the Goods and Services Tax Act to give legislative effect to the following measures :

a) To change the GST rate; Second Reading Speech by Lee Hsien Loong, The Deputy Prime Minister and Minister For Finance on The Goods And Services Tax (Amendment) Bill 2002

b) To provide for the transition from the existing GST rate to the new rate on 1 January 2003;

c) To zero-rate co-location web-hosting services and managed services;

d) To make explicit the Comptroller's powers to obtain information and records kept in electronic format or alternative media.

3. Sir, I shall now explain the main amendments in the Bill.

Increase in GST Rate

4. I have earlier stated the Government's intent to amend Clause 3 of the Bill to effect the amendment to Section 16 of the Act to increase the GST rate from 3% to 4% for the year 2003, and from 4% to 5% for the year 2004 and subsequent years.

5. I shall now explain the more technical points in the Bill.

Transition to Higher GST Rate

6. In view of the increase in GST rate, there is a need to provide transitional rules to prevent businesses from circumventing the time of supply rules. Under the time of supply rules, businesses may account for GST at the lower GST rate of 3% by issuing tax invoices to customers before the GST rate increase, even though the goods are delivered or the services are performed or the payment is made only after GST rate has been increased.

7. Hence, Clause 5 amends Section 39 of the Act to provide for the circumstances in which a tax invoice, issued before the date a change in rate comes into operation, ceases to have effect. Businesses will be required to issue a new tax invoice in these circumstances.

Zero-rating of Co-location Web-hosting Services and Managed Services

8. In a co-location arrangement, a service provider will generally require the customers to bring in their own server platforms and place them at his facilities. Where a local service provider provides web-hosting and managed services to an overseas customer in such a co-location arrangement, the services are standard-rated if the server belonging to the overseas customer is located in Singapore, and zero-rated if located outside Singapore.

9. Zero-rating the entire web-hosting services and managed services provided to an overseas person regardless of where the server is located will promote Singapore as an e-commerce hub. Hence, Clause 4 amends Section 21 of the Act to provide for zero-rating of the supply of services to an overseas person in relation to computer server equipment belonging to that person which is co-located in Singapore.

Clarification of Comptrollers' Powers

10. Increasingly, business transaction information and data are stored in computers, electronic media and other alternative media. However, the Comptroller of Goods and Services Tax's powers to access and to seize such electronic records may be limited based on the interpretation of the current legislation. Therefore, Clause 7 amends Section 84 of the Act to clarify the powers vested in the Comptroller to access and seize such records kept in electronic and other alternative media.


11. Mr. Speaker, Sir, I beg to move.

5 Dec 2002