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Second Reading Speech by Raymond Lim, Acting Second Minister for Finance on the Goods and Services Tax (Amendment) Bill 2004, at The Parliament, 17 Nov 2004

19 Nov 2004

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 to:

a) zero-rate services ancillary to the handling of ships or aircrafts and the handling or storage of goods carried in a ship or aircraft;

b) introduce a scheme to ease the cash flow burden of exporters in a qualifying industry;

c) clarify that zero-rating is allowed only where the services are made contractually to, and beneficially for, a person outside Singapore;

d) facilitate electronic transaction via IRAS's new IT system; and

e) empower the Minister to appoint Deputy Chairmen for the GST Board of Review.

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

Zero-rating of Ancillary Services for Handling of Ships, Aircrafts and Goods Carried in a Ship or Aircraft

4. Section 21(3)(l) of the GST Act presently allows zero-rating for services provided within the Free Trade Zone or designated area(s) of a port, terminal or airport for the handling of ships or aircrafts and the handling or storage of goods carried in a ship or aircraft. To qualify for zero-rating, these services must be provided within the specified physical boundaries of the Free Trade Zone, port, terminal or airport. Section 21(3) of the GST Act seeks to include services that are integral to the handling of ships or aircrafts and the handling or storage of goods carried in a ship or aircraft even if they are not carried out physically in the Free Trade Zone, port, terminal or airport.

GST Scheme to Ease Cash-flow Burden on Exporters

5. Presently, there are a number of schemes that serve to mitigate the cash-flow problems of exporters by waiving GST on imports bound for re-export. However, there is no scheme that relieves GST on local purchases even though they may be destined for export. Exporters that largely make local purchases for subsequent export have to pay GST on the local purchases and only subsequently obtain a refund of the GST when the items are exported.

6. For qualifying industries which predominantly engage in supplying products for export with no local consumption, a new scheme will be introduced whereby GST will be waived on specified products supplied from an identified party to another identified party in the qualifying industry. For a start, the scheme shall apply to the supply of marine fuel oil from oil majors or oil traders to bunker suppliers in the bunkering industry. The Act will be amended to effect the scheme.

Zero-rating of Services Provided for and to Overseas Persons

7. Section 21(3)(j) is amended to clarify that for the supply of services to be zero-rated, the services must be made contractually to and beneficially for an overseas person. This amendment, which reinforces the policy intent that only services consumed by overseas persons can be zero-rated, act as a safeguard against round tripping and tax avoidance.

Facilitating Electronic Transactions via IRAS's New System

8. IRAS will be replacing its information system, Inland Revenue Integrated System (IRIS) with a new system, Inland Revenue Interactive Network (IRIN). To enhance customer service, IRIN will enable the provision of e-services to taxpayers via personalised portals (e.g. e-notices and e-applications). With the GST Act amendment, electronic transactions and notices will have the same legal force as paper documents.

GST Board of Review

9. Currently, the Chairman of the GST Board of Review must preside the meetings of the GST Board of Review. To allow the efficient processing of cases, section 50 of the GST Act will be amended to allow the Minister the flexibility to appoint Deputy Chairmen to preside over hearing committees in the authority of the Chairman.

10. Section 51 of the GST Act currently allows the appellant and the Comptroller to object to certain members of the GST Board of Review from hearing the case. To prevent frivolous objections, the Act shall be amended to require the appellant and Comptroller to state reasons for their objections and to enable the Chairman to assess the merits of the reasons provided. Where the Chairman turns down the objection, reasons for the decision would be explained to the appellant and Comptroller. This will enable all members of the Board to be more gainfully deployed for the appeal process.

11. Similar amendments are being made to the Income Tax Act for Income Tax Board of Review and Property Tax Act for Valuation Review Board.


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