This journal entry will focus on the import GST deferment scheme, (IGDS) among the schemes announced in Budget 2010. Currently, GST on imported goods is payable to Singapore Customs at the point of importation, unless Imports Relief Order has been granted or the goods are imported under one of various import GST suspension schemes. With effect from 1 October 2010, eligible GST registered importers can apply for the new Import GST Deferment Scheme. Qualifying conditions will include a good compliance record and adoption of a monthly GST filing.
The approved GST registered businesses under IGDS scheme can defer their import GST payments until their monthly GST return due dates. This means that they account for the deferred import GST and claim it as input tax in the same GST return. GST stands for Goods and Services Tax. According IRAS regulation, a company or business is liable to register for GST when its annual taxable turnover is more than S$1 million or it is currently making taxable supplies and its annual taxable turnover is expected to be more than S$1 million.
Upon registering GST, a business must charge and account for GST at the prevailing rate which is known as output tax. However, GST registered businesses can also claim from IRAS the GST incurred on their goods and services purchased assuming certain conditions are met which is known as input tax. The limitation is while import GST paid would be recoverable as input tax credits by GST-registered businesses in their GST returns, the process of paying GST upfront and claiming it back at a later date could create a cash flow burden for SMEs.
The import GST deferment scheme, IGDS therefore aims to ease the import GST cash flow arising from the time lapse between the payment of import GST and the claiming of import GST for GST registered businesses. This is to allow importers to enjoy a credit period of one to two months, similar to what businesses enjoy for their local purchases. Effectively, there is no actual GST payment required for importation of goods. This indirectly provides support for enterprise upgrading. Without the scheme, a company would have had to pay an upfront payment of GST when the goods enter Singapore.
This would result in a difference in the cash flow timing. In an economic downturn, companies typically focus on getting back GST incurred on expenses more effectively and more quickly. They seek to postpone the time at which they need to account for GST on sales or net tax payable to the extent possible they may not meet legal compliance. Consequently, the new scheme would improve cash flows of businesses that source its goods from overseas suppliers. The new scheme would appeal to SMEs which are usually strapped for working capital.
The adoption of a monthly GST filing can also help encourage companies to file GST returns that are correct and on time. Although the IGDS scheme has obvious advantages in improved GST cash flow for importers, GST registered business should take into considerations in determining if they ought to apply for it. They should consider the additional compliance costs associated with monthly filing of GST returns instead of quarterly filing GST returns. In addition, the monthly filing of GST returns may result in earlier payment of net GST payable in comparison to filing GST returns to the IRAS.
GST hike ‘a necessary measure’ by Lee U-Wen*/Leong Wee *Keat Posted: 05 February 2007 1057 hrs http://www. channelnewsasia. com/stories/singaporebusinessnews/view/256686/1/. html GST shall be charged in accordance with the provisions of this Act on the supply of goods and services in Singapore (including anything treated as such a supply) and on the importation of goods into Singapore. The GST was introduced as part of a larger tax restructuring exercise, to enable Singapore to shift its reliance from direct taxes to indirect taxes. GST also enabled Singapore to sustain a lower income tax rate.
Is it really necessary to increase GST? Does it really benefit the lower income group? However, in the view of the economy, it is necessary to increase GST as it broadens the tax base. With an aging population, Singapore’s income tax base was expected to decline. If our tax infrastructure does not change, the tax burden on the working population would be too onerous in order to maintain or enhance the level of social and health services. With a broad-based GST, the taxation burden will be more evenly spread among the population. GST increase would be used to fund social spending, such as education and infrastructure.
In the time of economy depression, the government may use the GST collected, together with other taxes, spend on upgrading projects to boost the economy and to get out from the depression. Does the increase of GST affect the lower-income Singaporean? In actual facts, it will, but in good terms. Firstly, as we can see, the lower income group spends more on domestic goods, such as food and clothing, rather than on prestige items. This means that the GST they paid will be less compared to the higher income group, who spend more on luxury goods, recreation and relaxation.
Secondly, the GST collected will be helping the needy people and the elderly, by subsidizing their medical expenses and even education for the young ones. To upsized the benefit that the lower-income group can get, the government also introduces the GST offset package to help Singaporean, mainly on lower income group, to cope with the hike in the GST. This includes lower income taxes, lower property taxes, rebates on rental and service & conservancy charges for public housing, and additional subsidies for health, education and community services.
Some business also benefited from the schemes the government has provided for them. These schemes include the waiver of import GST for major exporters. To conclude, different people have different opinion on whether the increase of GST is necessary. In our view, although the GST offset package was implemented, most Singaporeans are not satisfied with the increase of GST. The government should come up with more schemes, such as increasing the amount of rebates and subsidies to help those who are not able to cope with the increase. 2010 Budget _http://www. kpmg. com. sg/publications/TaxBudget2010.
pdf__ Personal Tax – Increase in Parent Relief Singapore is shifting to a progressive property tax system that will mean lower and middle income property owners living in their homes will pay less tax. All owner-occupied homes will enjoy tax savings of $240 as a result of the exemption of the first $6,000 of AV. This will mean that all HDB flat owners and the large majority of private property owners will pay lower taxes. This system is fairer as we can say it is taxing the rich to give to the poor. This is a good way for Government to help owner occupiers of residential properties in Singapore.
This benefits more people compared to the current structure, which is a flat rate system. Although there are changes to the owner-occupied residential properties, non-owner-occupied residential properties and other properties remain unchanged. A higher tax rate for non-owner occupied properties coupled with reduced taxes for owner-occupied properties will result in further progressivity of the property taxation system. It might also help to curb excessive speculation in the property market to some extent, because speculation by definition is caused by people wanting to buy high and sell higher, not by people looking.