Budget 2018: GST to be imposed on digital services from 2020

Budget 2018: GST to be imposed on digital services from 2020

This does not impact e-commerce for physical goods, according to the Ministry of Finance.

Online shopping Singapore
File photo of a person shopping online. (Photo: Christy Yip)

SINGAPORE: There will be a goods and services tax (GST) imposed on imported digital services such as movie and music streaming services and mobile apps come 2020, Finance Minister Heng Swee Keat announced during his Budget 2018 speech on Monday (Feb 19).

Mr Heng said he is introducing this tax on imported services with effect from Jan 1, 2020, to make the country’s tax system “fair and resilient” in today’s digital economy.

“Today, services such as consultancy and marketing purchased from overseas suppliers are not subject to GST. Local consumers also do not pay GST when they download apps and music from overseas,” the minister said.

“This change will ensure that imported and local services are accorded the same treatment.”   

According to the Ministry of Finance (MOF), the GST will be imposed on business-to-business (B2B) and business-to-consumers (B2C) imported services, but will not affect e-commerce on physical goods below S$400. GST is levied on the import of all goods into Singapore, with the exception of goods imported via air or post and the value is below S$400.

It explained that currently, GST is applied on imported services provided by an overseas supplier that has an establishment in Singapore, but not if the provider is not established here.

However, with the advent of technology and the digital economy, it has become increasingly common for services consumed in Singapore to be obtained from overseas suppliers that do not have a presence here. For B2B services, these include marketing and accounting, IT and management, the ministry said.

It added for B2C services, these could mean video and music streaming like Netflix or Spotify, apps, listing fees on electronic marketplaces such as Apple’s or Google’s app stores, software, such as and online subscription fees. The inclusion of software could mean that services such as Microsoft’s Office 365 productivity suite would be liable under the new tax, Channel NewsAsia understands.

As such, online service providers who meet certain criteria will have to register themselves – under the Overseas Vendor Registration model - with the Inland Revenue Authority of Singapore (IRAS) in order to continue providing their offerings to Singapore consumers.

The criteria are: If their annual global turnover is more than S$1 million and whose sale of digital services to customers in Singapore is more than S$100,000. The latter requirement “minimises the compliance burden on overseas vendors which do not make significant sales to Singapore consumers”, the Finance Ministry said.

“Introducing GST on imported services will ensure that, irrespective of whether the service consumed in Singapore is bought from suppliers here or from suppliers abroad, the same GST treatment will apply,” the ministry said. 

The number of companies expected to be impacted by the new tax in the B2B category is about 1,000, while those in the B2C space is expected to number about 100 businesses, Channel NewsAsia understands.

MOF added that for imports of low-value physical goods, there are ongoing international discussions on how GST can apply. “We are reviewing international developments before deciding on the measure to take,” it said. 

The announcement comes on the heels of comments made by Senior Minister of State for Finance and Law Indranee Rajah, who said last November that e-commerce is an area that would allow Singapore to further diversify its tax base.

Source: CNA/kk