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Speech by Senior Minister of State for Finance and Transport Mrs Josephine Teo on the Second Reading of the Good and Services Tax (Amendment) Bill 2014 at the Parliament, 8 Oct 2014

08 Oct 2014
Date: 08 October 2014
Venue: Parliament
Speaker: Mrs Josephine Teo
Mdm Speaker, I beg to move, “That the Bill be now read a second time”.

2. The Goods and Services Tax (Amendment) Bill 2014, or the GST Bill for short, comprises three amendments. These amendments arise from our ongoing review of the Goods and Services Tax (GST) system.

3. The draft Bill was released for public consultation in June this year. MOF has evaluated the feedback received and where relevant, accepted the suggestions. I will now explain the amendments.

GST treatment for non-legal entities with regard to business properties held through bare trustees

4. First, Clauses 2, 3, 4 and 10 provide for the GST treatment for non-legal entities with regard to goods, land, buildings, intellectual property rights and licence to use intellectual property rights. I will refer to such properties as “business properties” in short. 

5. Due to a lack of legal capacity, a non-legal entity such as a partnership, may hold business properties which it uses for its business, through legal entities such as individuals in a partnership or another company. These individuals or companies act as “bare trustees” of the non-legal entity, and have no interest in the properties other than for the purpose of holding legal title or legal interest in the properties.

6. Currently, a non-legal entity which is GST-registered, is unable to claim the GST incurred on the acquisitions of business properties made via a bare trustee as it is not the legal owner of these properties. In addition, the GST Act is silent on whether the non-legal entity is required to account for GST on the supplies of such properties in the course of its business.

7. To put non-legal entities on par with legal entities with regard to the GST implications of holding properties, a non-legal entity that is GST-registered and hold its business properties through bare trustees will be allowed to:

i) claim GST incurred on acquisitions of such properties; and

ii) account for GST on its supplies of these properties.

A non-legal entity will also be required to take into account such supplies when determining whether it has crossed the $1million taxable turnover-threshold, and therefore will be liable to register for GST. 

Allow GST-registered persons to claim the GST incurred on re-import of goods that belong to customers

8. The second amendment relates to the claiming of GST incurred by businesses on re-import of their customers’ goods.

9. A GST-registered business may send goods belonging to his customers for value-adding activities overseas. This is common if the value-adding activities required by his customers are not readily available in Singapore, or if they are more cost effectively done overseas.

10. When the GST-registered business re-imports the goods, it is liable to pay import GST for the full value of the goods which includes value-add from the activities performed overseas. The business can only claim the GST attributable to his supply of value-adding activity, but not the portion of import GST relating to the original goods without the value-added component. 

11. To facilitate the provision of value-adding activities by GST-registered businesses, the proposed amendment will allow these businesses to claim the full GST levied on the re-import of goods belonging to their customers. These businesses can also apply for existing import GST suspension and deferment schemes subject to eligibility conditions. Clauses 7, 8 and 9 of the Bill provide for the changes.

Clarify scope of zero-rating in relation to goods for specified use or installation on ships

12. The final amendment clarifies that zero-rating of GST for goods provided for specified use or installation on ships or to persons approved under the Approved Marine Customer Scheme, applies only to the sale or rental of the goods, and not to all supplies relating to the goods. This is a technical amendment with no change in policy. Clauses 5 and 6 of the Bill give effect to the change.

13. Mdm Speaker, I beg to move.