Why Water Conservation Tax Is Subject To GST

In his letter ("Is Water Conservation Tax fair? Ask Iras", ST 28 July 2007), Mr Karma Tsultrim Wangchuk suggested that the Water Conservation Tax (WCT) should not be subject to GST. We wish to thank him for this opportunity to clarify the policy on GST.

2. GST is a tax on the final value of goods or services supplied in Singapore. Taxes and duties that are related to the supply of a good or service - for example, tobacco duty, liquor duty, betting and sweepstake duties, and WCT form part of the final value of the good or service. GST is thus imposed on the final value inclusive of such taxes and duties. This is also the practice in the UK, Australia and New Zealand.

3. Charges that have no relation to the supply of goods and services do not attract GST. For example, the Additional Registration Fee (ARF), Certificate of Entitlement (COE) and Registration Fee (RF) are imposed on the registration of a motor vehicle, and not its supply. Similarly, Road Tax is imposed on the ownership of a vehicle. It is possible to sell a car without paying any of these registration or ownership charges, provided the car is not registered for use on public roads. Hence, GST is not imposed on them.

4. We would like to thank Mr Wangchuk for his feedback.

HARVEY KOENIG
DEPUTY DIRECTOR (TAX POLICY)
MINISTRY OF FINANCE