But all of that hand-holding will end in 2021. After a year of cushioning from government flyers, it’s time to move on to higher GST rates and the introduction of GST on everything from non-digital services to imported goods and services to steel.
Here are the changes that can be expected in the next few years:
1. GST for digital services (available since 2020)
In case you missed it, the GST for all digital services, ie the “Netflix tax”, has been in place since early 2020.
GST is now payable for all services purchased online from overseas service providers, including online subscriptions, which many of us cannot live without. Here are some well-known examples:
|Taxable digital services||Examples|
|Music streaming||Spotify, Apple Music|
|Game subscriptions||Playstation plus|
|Software programs||Microsoft Office|
|Data management services||Web hosting, cloud storage, etc.|
You may or may not have seen a 7 percent increase in your monthly subscription fee. If you haven’t, the company may have taken the tax right now – but we expect most to pass these costs on to us.
2. GST for all imported goods (from 2023)
Have you bought products online for less than the local stores sell? Then get ready to wince as the GST will be calculated for all imported goods starting January 1, 2023.
Previously, GST was levied on imported items that cost more than $ 400, as some of you may have accidentally discovered when ordering items from overseas.
From 2023, however, GST will be extended to all items delivered by air and mail regardless of cost. (Goods shipped by land and sea are already taxed.)
So you need to prepare to pay 7 percent or 9 percent more for online purchases (depending on whether the GST rate has been increased … more on that later).
If there are certain basic needs that you are used to shopping online, you should do the calculations ahead of time so that you can find a cheaper alternative before 2023 if needed.
Larger overseas providers like Taobao or already registered Singapore providers like Shopee, Qoo10 and Lazada will likely end up collecting GST.
With smaller providers, the picture is still a bit blurry. It is likely that the GST amounts will not be taken into account at check out and you will have to pay the GST when your item is delivered.
3. GST for imported non-digital services (from 2023)
To cover all bases and ensure that Singaporeans pay for GST for everything purchased online, the government will begin collecting GST for “non-digital” services from 2023 onwards.
Non-digital services refer to things like teaching and counseling and are different from digital services like streaming and downloads.
Any type of online course, for example through schools or service providers like Udemy or Coursera, could now attract GST. The same applies to your online therapist, online language teacher, online fitness courses or telemedicine. As long as the service provider is not based in Singapore, GST is payable.
Due to the pandemic, more and more people have turned to online learning as a cheaper alternative to in-person tuition. It might be time to reevaluate costs before 2023 and make comparisons with live classes and services.
4. GST increase from 7 to 9 percent (anytime from 2022 to 2025)
The government has been discussing this for a number of years and announced in 2018 that 2021 would be the year when the GST was increased from 7 to 9 percent.
Since then, it has been announced that the dreaded GST hike will happen sometime between 2022 and 2025. And the government has warned that this will happen sooner rather than later.
So 2021 should be the year we re-evaluate our budgets to make sure we have room to increase.
Are these GST walks fair?
The announcements about the 2021 GST budget are obviously not going to please many Singaporeans. The government has tried to mitigate the blow by twisting some of the GST updates to improve the playing field for local retailers.
However, this protectionist conversation distracts us from another topic – how GST increases could disproportionately affect the poor in Singapore.
To be fair, all governments must increase tax revenues in one way or another. And some might say that the rich are spending more, so they are paying more GST.
In practice, however, lower income groups tend to spend more of their money on goods and services. Someone who lives hand to mouth and spends 99 percent of their salary on the essentials pays 7 to 9 percent GST for all of that.
The rich, on the other hand, are likely to save or invest more of their income instead of spending it on goods and services that attract GST.
Those in the lower income brackets or those who suffer from a lack of money (e.g., the squashed middle class who may not save or invest much) are the ones who need to tighten their belts the most.
Is the GST voucher scheme sufficient?
The government’s permanent GST voucher program is an attempt to fix the above error. Every year, lower-income Singaporeans receive a few hundred dollars in cash to offset the rise in the cost of goods and services.
For 2021, GST coupons for 2021 will range from $ 350 to $ 500 and will be distributed based on the annual value of your home.
But are the GST coupons enough to fix the imbalance?
With a GST rate of 7 percent, $ 500 is enough to offset the GST to $ 7,143 in expenses, while $ 350 offsets about $ 5,000 in value. Remember, it’s spending for a whole year. So you have to pay out of pocket in your annual expenses any additional GST that is above this threshold.
And that doesn’t even take into account price increases for reasons other than GST (like rent, labor, or cost of deliveries).
With the cost of living soaring – with or without GST increases – it’s likely that many struggling financially will have to steel themselves for even tougher times from 2023 onwards.