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TAXES AND DUTIES
Goods and Services Tax (GST)
Why is there a need to increase GST, sometime from 2021 to 2025?
The increase in the GST rate from 7% to 9%, sometime from 2021 to 2025, will help to support rising expenditures to care for an ageing population, to invest in early childhood education, and to keep Singapore safe from rising security threats like terrorism. The GST collected will support public spending that benefits Singaporeans, in the form of social support and security spending so that we can better care for, develop and protect our people.
To address the impact of GST, in particular on lower-income households, we will continue to fully absorb GST on subsidised education and subsidised healthcare. We will continue with and enhance the current GST Voucher scheme when the GST is raised, to defray costs for lower-income households and seniors.
We are focused on ensuring that Singapore’s overall system of taxes and transfers comprising subsidies and grants from the Government remains equitable. Lower-income households receive more transfers from the Government than all the taxes they pay, while the better-off pay more taxes than the transfers they receive.
How does the Government mitigate the regressivity of GST?
In Singapore, we adopt a broad-based, single-rate GST regime. This means that we apply the same GST rate to goods and services consumed. Therefore, those who spend and consume more, will contribute more to GST revenue.
We should not look at GST in isolation, as GST is part of our overall taxes and transfers system.
Singapore has a unique system of offsets – our GST works hand in hand with the GST Voucher Scheme and other social assistance schemes to create a fair and equitable system.
The GST Voucher scheme is a permanent scheme introduced in 2012 to help lower-income and middle-income Singaporeans with cash support and utilities rebates to defray some of their GST expenses. For seniors, they get MediSave top-ups too.
This way, the net GST (GST less value of offsets) incurred by lower-income households is lowered. Together with other social schemes, lower- and middle-income households receive more in benefits than taxes they pay.
In addition, we have other schemes and programmes to support the less well-off, such as Workfare and Silver Support. From education, to healthcare, to housing, our social programmes provide higher levels of support for the lower- and middle-income households than they do for the well-off, with lower-income households benefiting the most.
We are mindful of the impact of GST, especially on lower- and middle-income households. Thus, the Government will provide additional support when we implement the GST increase:
The Government will continue to absorb GST on publicly subsidised education and healthcare.
The permanent GST Voucher scheme will be enhanced to provide more help to lower-income households and seniors
A transitional offset package, with more support for lower- and middle-income households, will be introduced to help Singaporeans adjust to the GST increase.
Why can’t we exempt or lower GST on necessities?
Higher-income households benefit more from a multi-rate GST system. Exempting or introducing lower GST rates on certain goods and services will benefit everyone, including higher-income households. In fact, as higher-income households spend more overall, these households benefit more from the exemption or lowered rates.
Instead, with GST collected from all goods and services, we provide targeted assistance through GST Vouchers and other subsidies. This is a fairer and more equitable approach, rather than waiving GST for some goods for everyone, whether rich or poor.
Moreover, the experience of many countries and relevant studies show that a multiple rates complicate the GST system, which raises compliance costs for businesses. Doing so will result in classification issues, increased tax disputes and peculiar outcomes.
Where can I get information about the Goods and Services Tax?
IRAS publishes comprehensive information on the IRAS website relating to our GST (or VAT) system, which you may find useful. You can access the IRAS website at
to access information relating to GST.
Why is GST applicable to the water conservation tax?
The water conservation tax (WCT) and the GST serve different purposes. The WCT is a component to the water price in the monthly bill, to reflect the fact that water is precious, and to encourage every individual and company to play a role in conserving our water resources.
GST is applicable on the consumption of goods and services, and hence would correspondingly apply on the total price of the good or service. The total price of the water includes the WCT, and GST is applied on this total price.
This is similar to practices in other jurisdictions such as the United Kingdom and New Zealand.
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Last Reviewed on 15 Aug 2011
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