YOUth should know: 5 things about the upcoming GST hike on Jan 1

In the 2022 Budget, Finance Minister Lawrence Wong announced that the goods and services tax (GST) will gradually be raised incrementally from 7 per cent to 9 per cent by 2024.

The first increase will happen on Jan 1, 2023, with the GST rate adjusted to 8 per cent. This will affect all purchases of goods and services from GST-registered businesses, and consequently, consumers.

Here are five things youths should know about the GST hike:

There are a number of scenarios in which payment or goods and services are received on different dates. The GST rate applicable to these transactions differs based on the dates they are received.

Generally, if full payment is made in 2022, the 7 per cent GST rate will be applied. If payment is made on or after Jan 1, the 8 per cent GST rate will apply.

If partial payment is made before Jan 1, and payment is completed after Jan 1, the 7 per cent GST rate will only apply to the amount paid before Jan 1. The rest of the payment will be subject to the 8 per cent rate.

The Inland Revenue Authority of Singapore (IRAS) has also created a flowchart that consumers can use to determine the GST rates that will be applied to their transactions.

From Jan 1, low-value goods (valued at $400 and below) imported into Singapore via air or post will have GST applied to them.

Imported non-digital services will also be subject to GST from Jan 1 onwards. These services include online counselling and matchmaking services as well as distance learning classes and online examination services where students can obtain certifications.

There will be no change regarding the GST treatment for imported goods that are valued above $400.

At Budget 2020, the Government announced the Assurance Package for GST. An initial $6 billion was set aside for the Assurance Package and the Government has since topped up another $1.4 billion.

The package includes MediSave top-ups for Singaporean children and seniors and cash payouts for all adult Singaporeans. All Singaporean households will also receive two tranches of Community Development Council (CDC) vouchers worth $200 each in 2023 and 2024.

The permanent GST Voucher (GSTV) scheme, first introduced in 2012 to help lower-income Singaporeans, will be enhanced to help offset the GST expenses of lower- to middle-income households in the face of the GST hike.

The enhancements to the GSTV scheme include increased cash payouts and the introduction of the Service and Conservancy Charges Rebate as a permanent component of the GSTV scheme, which will directly offset these charges payable by eligible HDB households.

Some businesses will be absorbing the GST rate change, such as OWNDAYS branches and participating Changi Airport shops in the public areas. 

These businesses will still have to comply with the price display and invoicing requirements outlined by the IRAS, and the prices they charge will be inclusive of GST. The tax invoices received from these businesses will still have to show the GST payable as a separate amount.

Absorption of GST will mainly affect the way businesses file their taxes.

Businesses are not allowed to charge and collect GST at 8 per cent before Jan 1. They are also required to display GST-inclusive prices on their price displays that reflect the increase from Jan 1 onwards. 

Those that do not comply with these requirements can be reported to the IRAS by consumers through this form.

Businesses that charge and collect GST despite not being registered for GST, as well as those that fail to comply with invoicing requirements can also be reported through the form.

Additionally, unjustified price increases of essential goods and services citing GST as a reason can be reported by providing feedback to the Committee Against Profiteering (CAP).

This includes businesses that raise their prices before the GST rate change as well as those that raise their prices by more than the GST increase after the rate change and cite the GST increase as the reason for the change.