GST on imported items bought online: Experts, consumers unsure if it will make more people buy local

GST on imported items bought online: Experts, consumers unsure if it will make more people buy local

A parcel moves on the conveyor belt at Amazon's logistics centre in Graben
FILE PHOTO: A parcel moves on the conveyor belt at Amazon's logistics centre in Graben near Augsburg. (REUTERS/Michaela Rehle)

SINGAPORE: Experts and consumers are uncertain if the Government's move to extend the Goods and Services Tax (GST) to low-value items imported via air or post will make a push towards buying local.

Deputy Prime Minister and Finance Minister Heng Swee Keat said in his Budget speech on Tuesday (Feb 16) that the move, which kicks in on Jan 1, 2023, will cover goods valued up to S$400.

This effectively imposes GST on all online shopping from overseas retailers, as imported goods brought in via sea or land, or valued above S$400, are already subjected to GST.

Mr Heng said on Tuesday that the move will "ensure a level playing field for our local businesses to compete effectively", as overseas suppliers of goods will be subjected to the "same GST treatment" as local suppliers.

READ: Budget 2021: GST to be imposed on all imported goods purchased online

A group representing small- and medium-sized enterprises (SME) welcomed the move, saying that the current GST import relief threshold of S$400 has put local businesses at a disadvantage.

While overseas retailers will likely increase prices of their low-value goods to factor in GST, observers said, the extra tax will not deter their expansion plans in Singapore amid the growing popularity of online shopping.

Observers and consumers said it remains to be seen if the move will persuade more to buy local, as this also depends on factors like the variety and reliability of items offered, as well as their overall price competitiveness.

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

Experts said the move was a long time coming, given that the Government had recently extended GST to imported digital services and was also reviewing international developments on taxing imported goods.

"With increasing levels of e-commerce, levelling the playing field to domestic retailers by charging GST on low-value shipments into Singapore was inevitable," said Mr Adrian Ball, ASEAN global trade partner at Ernst & Young Solutions.

"The revenue that this measure generates is probably just icing on the cake compared to the core intent."


The Association of Small and Medium Enterprises (ASME) said it was "glad" that the Government was committing to this intent, pointing out that the group had recommended this move a few years ago.

"Against foreign online retailers who do not have to charge GST, local companies have been put at a disadvantage for many years," its president Kurt Wee said.

"This initiative will help to level the playing field for Singapore businesses and may even be better for our retailers if it could be implemented earlier than 2023."

Budget 2021 GST for imported low value goods

For consumers choosing between local or overseas retailers, the change will remove the additional GST factor, said Associate Professor Simon Poh of the National University of Singapore (NUS) Business School.

"Previously, they may prefer to buy from overseas suppliers if no GST is charged," he told CNA.

However, GST leader at PwC Singapore Kor Bing Keong told CNA that consumers' decisions will also be "influenced by factors other than GST, such as price competitiveness, variety and reliability of the suppliers".


Mr Wong Wenbin visits Chinese e-commerce site Taobao once every two to three months to buy items like small furniture and snacks not sold in Singapore because of the variety and competitive prices on offer.

The 29-year-old, who works in marketing, said the move will not stop him from patronising Taobao, as he usually gets his items delivered by sea, meaning they are already subjected to GST.

"And Taobao prices are usually still quite good generally," he said.

READ: Some businesses, charities see minimal impact from new imported services GST in 2020

Another consumer, who only wanted to be known as Mrs Tan, said she window shops on Taobao at least once a week for apparel and household items, because of their competitive prices even after GST and delivery fees.

The 30-year-old communications professional said the move will affect her sometimes impromptu purchases on Taobao, like clothes she recently bought on the site for Chinese New Year.

"It would make me reconsider frequent purchases as these little costs do add up," she said.

Nevertheless, Mrs Tan said she looks beyond GST when deciding whether to buy from overseas or local suppliers, like whether she prioritises quality or cost savings.

"Usually, I’d purchase something locally if I need it urgently, or if I require a warranty for it, for instance. Typically I purchase items online (from overseas) when I’m willing to wait and need a cheaper alternative," she explained.

"Hence, I’d say it (extension of GST to low-value imported goods) may or may not level the playing field between local businesses and overseas e-commerce players."

WATCH: Overseas digital vendors likely to absorb initial 'Netflix tax', say experts

Assoc Prof Poh said it is difficult to see the changes altering existing consumer behaviour.

"If they are used to buying from the large overseas e-commerce players, the extra 7 per cent or 9 per cent is not likely going to deter their purchases, so long as these prices after factoring in the GST are still competitive when compared to buying from brick-and-mortar outlets," he said.


Assoc Prof Poh added that overseas e-commerce players will not be deterred by the changes.

"Given the trend of increasing online purchases, these businesses will likely continue to expand their businesses in Singapore," he said.

PwC's Mr Kor said these retailers will likely increase the prices of their low-value goods to account for the additional GST, and tweak some of their systems and processes to prepare for additional administrative tasks.

According to MOF, retailers that make "significant" supplies of low-value goods to local consumers must register for GST, collect GST on the sale of imported low-value goods, and pay GST to the Inland Revenue Authority of Singapore  (IRAS).

READ: Commentary: Has COVID-19 made e-commerce and online shopping the new normal?

Mr Kor said this is different from how imported goods brought in via sea or land or valued above S$400 are charged for GST, which is a process is done by Singapore Customs at the border.

This means that retailers are required to track where their goods come from and how they are delivered, information usually handled by logistics or courier service providers, he said.

Currently, low-value goods imported via air or post are not subject to GST to facilitate clearance at the border.

Mr Kor believes that overseas e-commerce businesses should be "relatively familiar" with the changes, especially as similar rules have been introduced in countries such as Australia, New Zealand, Switzerland and the UK. 

READ: Commentary: E-commerce is set to boom, driven by COVID-19

CNA has contacted overseas e-commerce giants like Amazon, ASOS and Alibaba, which runs Taobao and ezbuy, for comment.

MOF has said that IRAS will soon consult the industry before finalising implementation details.

"The change will also ensure that our GST system remains resilient as the digital economy grows," it said.

Source: CNA/hz