Second Reading Speech by Second Minister for Finance, Indranee Rajah, on the Goods And Services Tax (Amendment) Bill 2021

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

1. The Goods and Services Tax (Amendment) Bill 2021 covers four sets of amendments. Two give effect to measures that were announced in the 2021 Budget Statement. The other two arise from our periodic review of the GST regime to clarify GST treatment and improve GST administration.
   
    

2. The Ministry of Finance sought views from the public on the draft Bill earlier this year. The public consultation was conducted from 6 to 27 July 2021. MOF has published on 1 October 2021 our responses to the key feedback received. We have evaluated the feedback received and incorporated them where relevant and feasible to do so. We thank the contributors for their inputs which has allowed us to refine the amendments.
   
    

3. Let me start with the first two sets of amendments, which relate to the changes announced in the 2021 Budget Statement on 16 February 2021.
   
    
   
   A – Introduction of GST on low-value goods imported via air or post and B2C imported non-digital services

4. We impose GST on all goods imported via land or sea, regardless of value.  We also impose GST on goods imported by air or post with a value above S$400.  We currently do not have GST on goods imported by air or post with a value of S$400 and below. This is a gap which puts local businesses at a disadvantage.
   
    

5. To close this gap, the first set of amendments introduces GST for goods that are valued up to the current GST import relief threshold of S$400, or “low-value goods”, that are imported via air or post from 1 January 2023 onwards.
   
     

6. The first set of amendments also introduces GST for business-to-consumer, or “B2C”, imported non-digital services, such as live interaction with overseas providers of educational learning and telemedicine.
   
    

7. The extension of GST to such imported low-value goods and B2C imported non-digital services under these amendments will complement the GST that we already levy on business-to-business, or “B2B”, imported services, and on B2C imported digital services from 1 January 2020.
   
    

8. Other jurisdictions have extended their GST or Value Added Tax, or “VAT”, similar to our proposed amendments. Jurisdictions that have extended their GST or Value Added Tax regimes to cover imported low-value goods include Australia, the European Union, New Zealand, Norway, Switzerland, and the United Kingdom. Similarly, jurisdictions which already tax B2C imported non-digital services include Australia and New Zealand.
   
    

9. The introduction of GST for low-value goods imported via air or post and for imported B2C non-digital services is necessary to ensure a level playing field for our local businesses and allow them to compete effectively. Overseas suppliers of goods and services will be subject to the same GST treatment as local suppliers. These amendments will also keep our GST system resilient in a growing digital economy.
   
    

10. The legislative changes for the first set of amendments can be found in clauses 2 to 4, 6 to 15, and 17 to 26 of the Bill.
    
     
    
    B – Update the GST treatment for a supply of media sales

11. Next, I will deal with the update on the GST treatment for a supply of media sales.
    
     

12. The second set of amendments updates the GST treatment for a supply of media sales. Media sales refer to the sale of advertising space for hardcopy print and outdoor advertisements, advertising airtime for broadcasting via TV and radio, and web advertising via email, internet or mobile devices.
    
     

13. Currently, the basis for determining whether a supply of media sales is zero-rated or standard-rated depends on the place of circulation of the advertisement. If the media sales are circulated in Singapore, GST applies. If they are circulated abroad, then the supply of media sales is zero-rated.
    
     

14. However, this is no longer reflective of the state of media sales today. Online advertising has grown and is expected to account for an increasing share of advertising spending in future. Developments in digital technologies have changed the way that media sales are supplied and made it more difficult for suppliers of digital media sales to determine the place of circulation of the advertisement.
    
     

15. We therefore need to update and revise the GST treatment of media sales. Thus, with effect from 1 January 2022, the GST treatment for a supply of media sales will instead be based on where the person who contracts for the service, for example, a local or overseas headquarters or HQ, and the person who directly benefits from the service, such as a subsidiary in Singapore, belong. For example, if the contractual customer of the media sales service belongs in Singapore, GST will be charged at the standard rate.
    
     

16. This amendment is provided for in Clause 11 of the Bill.
    
     

17. Beyond these two sets of amendments, MOF regularly reviews the GST regime to clarify GST treatment and to improve GST administration. Let me now touch on the remaining two amendments in the Bill arising from this periodic review.
    
     
    
    C – Update the transitional rules for change in GST treatment

18. The first amendment arising from this periodic review updates the transitional rules for changes in GST treatment.
    
     

19. For supplies spanning the date of a change in GST treatment, the transitional rules under the GST Act and Regulations help taxpayers determine whether the old or new GST treatment applies. These rules were last amended in 2011.
    
     

20. Since then, there have been changes to our GST system. For instance, we introduced GST on imported B2B services and imported B2C digital services from 1 January 2020.  We have reviewed the transitional rules and updated them in consultation with the industry. The proposed updated transitional rules will help prevent revenue risks, particularly for related-party transactions, provide tax certainty, and ease the compliance burden of taxpayers whenever there is a change in GST treatment.
    
     

21. These proposed updated transitional rules will apply to changes such as the proposed change of GST treatment for a supply of media sales from 1 January 2022.
    
     

22. This amendment:
    
    
    D – Miscellaneous amendment to the Overseas Vendor Registration and Reverse Charge regimes
    

23. Finally, the second amendment arising from the periodic review of our GST system seeks to make miscellaneous changes to the Overseas Vendor Registration, or “OVR”, and Reverse Charge, “RC”, regimes – these are regimes for enforcing GST on low-value goods imported via air or post and imported services. The miscellaneous changes seek to prevent revenue risks, provide tax certainty, and ease compliance burden.

24. Mdm Deputy Speaker, I beg to move.