GST on Water Conservation Tax

Parliamentary Question by Mr Low Thia Khiang:

To ask the Minister for Finance whether the Ministry will consider removing the GST on water conservation tax.

Parliamentary Reply by Minister for Finance Mr Heng Swee Keat:

1. The water conservation tax (WCT) and the GST serve different purposes. The WCT is levied on all water consumers, to reflect the fact that water is precious, and to encourage every individual and company to play a role in conserving our water resources. When the WCT is added to the water tariff, consumers are paying the long-run marginal cost of water: what it costs to produce the next drop of water from our desalination and Newater plants.
 
2. The GST is a tax levied on the consumption of goods and services. It is computed based on the final price of goods or services, inclusive of any other taxes and duties. The WCT is part of the final price of water that the GST is levied on. This is consistent with similar practices in other nations such as the United Kingdom and New Zealand.

3. What is important is that the Government keeps our system of taxes fair, by helping the lower- and middle-income households through subsidies and grants. For example, the GST is accompanied by permanent schemes such as GST Vouchers. This has a Utilities-Save component which provides rebates to more than 840,000 households each year to offset their utility bills, with more rebates for those living in smaller HDB flats.