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Second Reading Speech by Lawrence Wong, Second Minister for Finance and Minister for National Development on the Goods and Services Tax (Amendment) Bill 2019, at Parliament on 4 Nov 2019

04 Nov 2019

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

2. The Goods and Services Tax (Amendment) Bill 2019 covers five amendments. Two of them seek to refine the implementation of Goods and Services Tax (“GST”) on imported services, which was passed in the GST (Amendment) Bill 2018. The other three arise from periodic review of the GST regime to clarify technical rules, improve GST administration, and reduce business compliance costs. 

3. The Ministry of Finance (“MOF”) sought views from the public on the draft Bill earlier this year. We have evaluated the feedback received and incorporated them where they are relevant to the Bill.

4. Let me start by highlighting the first two amendments, which relate to the implementation of GST on imported services, which will come into effect from 1 January 2020. 

5. The first amendment provides technical clarifications and improvement to GST administration in relation to imported services. This includes refinements to the Overseas Vendor Registration regime, to allow GST group registration for overseas suppliers, as well as allow local electronic marketplace operators to account for GST on both B2B and B2C supplies of digital services, on behalf of their underlying suppliers. The amendment also seeks to clarify the scope of Reverse Charge, that it applies to all businesses that are GST-registered or liable for GST registration, and are not allowed input tax claims in full. So these changes ensure parity between local and overseas purchases, and will help ease business compliance. The changes are found in clauses 4 to 9, 15 to 17, 19, and 20 in the Bill. 

6. The second amendment introduces offences for misrepresentation of information. This measure is required for Inland Revenue Authority of Singapore (“IRAS”) to enforce GST on imported services effectively, as suppliers under the Overseas Vendor Registration regime operate overseas, and rely on information provided by customers to determine if GST is applicable. Clause 12 in the Bill provides for these changes.

7. As mentioned earlier, MOF regularly reviews the GST regime, and so l will highlight the last three amendments found in the Bill arising from this periodic review. 

8. First, we will update our GST treatment of digital payment tokens (also commonly known as cryptocurrencies). Today, the exchange of fiat currency, and the provision of loans in fiat currency are financial services, which are exempt from GST. While digital payment tokens are not legal tender like fiat currency, they are known to serve as a medium of exchange in some transactions. So, we will exempt from GST the supply of digital payment tokens that are in exchange for fiat currency or other digital payment tokens. We will also exempt from GST the loan of digital payment tokens. 

9. Likewise, the use of fiat currency as payment for goods and services today is not subject to GST. But increasingly, we are seeing the acceptance of digital payment tokens as a means of payment for goods and services, at local retailers. Accordingly, the amendment also seeks to not subject the supply of digital payment tokens to GST, when they are used as a means of payment for goods and services. This means that whether digital payment tokens or fiat currency are used to purchase goods and services, GST is chargeable only on the supply of goods and services, and not on the digital payment token itself.

10. This proposed treatment is similar to the GST rules for digital payment tokens in Australia, the European Union, Switzerland and Japan. The changes that are required to be made to the GST Act are found in clauses 3, 10, and 16 to 18 of the Bill. 

11. Second, to align ourselves with international trends and to improve accountability and promote open justice, tax proceedings before the Courts will no longer be heard privately by default. Clause 11 of the Bill provides for the change. Similar changes were passed in this House last month in relation to the Income Tax Act. The changes relating to Court proceedings, under the GST Act and the Income Tax Act, will take effect on 1 January 2020.

12. Finally, to safeguard the interests of taxpayers who lodge appeals to the GST Board of Review (“the Board”), we will introduce definitions of “accountant” and “advocate and solicitor”, to ensure that representatives handling taxpayers’ appeals to the Board meet certain professional qualifications. Clause 2 of the Bill provides for the change. These definitions are consistent with those currently found in the Income Tax Act for the purposes of appeals heard before the Income Tax Board of Review.

13. Mr Speaker, I beg to move.