Parliament passes Bill to prescribe list of non-taxable government fees after wrong GST charges
The initial list of non-taxable fees will be published in the Gazette in end-April when the Bill comes into force, says Transport Minister and Second Minister for Finance Chee Hong Tat.
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SINGAPORE: The government will prescribe a list of regulatory fees where the Goods and Services Tax (GST) should not be charged after parliament passed a Bill on Tuesday (Apr 2).
The GST (Amendment) Bill will provide greater clarity on the tax treatment for government fees and address the issue of GST being wrongly levied on 18 fees paid to six government agencies, said Transport Minister and Second Minister for Finance Chee Hong Tat as he tabled the Bill for a second reading.
The erroneous GST charges were first made known in February by the Ministry of Finance (MOF) following an internal review. The government has said it will make at least S$7.5 million (US$5.6 million) in refunds to affected individuals and businesses.
GST is generally levied on government services. These include, for example, fees for the use of public sports facilities or the rental of hawker stalls.
Doing so ensures parity in tax treatment where services that can potentially be provided by or outsourced to the private or non-government sector are subject to GST, said Mr Chee.
However, GST should not be charged for services that are regulatory in nature, or done for the purposes of control and regulation.
The Government will centrally prescribe a list of its non-taxable fees to provide greater clarity and certainty to everyone. Fees in the non-taxable list would include those for applications to approve a regulated activity. For example, applications for professional licences and their licence renewal fees will be non-taxable, and would include the 18 regulatory fees that the Government is refunding. All other fees that are not part of this list will be subject to the Goods and Services Tax (GST). As part of this change in legislative approach, the Ministry of Finance (MOF) and Inland Revenue Authority of Singapore will work closely with agencies to assess their fees instead of allowing self-assessment by agencies. MOF had reviewed all the regulatory and ancillary fees that currently charged GST and announced in February the refund of GST on 18 fees where GST was wrongly charged. It is now working with agencies on the remaining regulatory and ancillary fees which do not charge GST. There are more than 1,700 such Government fees which MOF is reviewing. If Parliament approves the Bill, the initial list of non-taxable fees will be published in the Gazette in end-April, when the Bill comes into force. MOF will continue to work with agencies to progressively prescribe their regulatory fees in the non-taxable list and aims to complete this by September this year. All fees that are not prescribed in the non-taxable list will be subject to GST. Second Minister for Finance Chee Hong Tat announced this in Parliament on Tuesday (Apr 2). He pointed out that there are three categories of such fees. The first category, which involves the vast majority of fees, relates to services provided by the Government which are clearly and already charged with GST today. The second category comprises fees that are charged with GST today, but where there has been inconsistency in the interpretation of the law by agencies. For example, agencies may charge fees for examinations that an individual must undertake prior to being licensed as a practising professional in a regulated industry. Such examination fees should attract GST. For agencies that have been charging GST on such fees, the Government will validate these past GST collections. The third category is fees that are not charged GST but should be charged with GST. These include more than a hundred examination and inspection-related fees. Mr Chee said the  Government will help to minimise the impact on the public by absorbing the GST in the first instance and imposing a freeze on these fees until end-2025. Hence, all affected fees will not increase immediately. Mr Chee said MOF will work closely with the agencies to review whether the fees can be reduced or even removed. If there are unavoidable cost increases, then the agencies would have to raise their fees. But they will do so only after end-2025 and will ensure that any increases are phased in gradually, taking into consideration the impact on affected stakeholders. Mr Chee told the House that the Government is proposing a clearer and more robust approach - one that ensures the correct GST treatment on Government fees by centralising the assessment and making clear the list of non-taxable fees via legislation. Â
The 18 fees that were found to have been wrongly taxed comprised application fees for professional licences like a real estate agent licence, registering a Lasting Power of Attorney and administrative fees for renting out public flats. As most of them are for the processing of applications, rather than licence fees, agencies had wrongly deemed them to be taxable, authorities had said previously.
At the moment, government agencies get to assess and determine what constitutes a regulatory fee, based on guidance provided through government circulars. But agencies “may not always be clear where to draw the line”, said Mr Chee.
“This is not ideal and can give rise to wrongful charging of GST, as was the case for the 18 fees.”
WHAT WILL BE DONE
With the Bill, the government will prescribe a list of non-taxable government fees, such as those paid for applications of professional licences and licence renewal fees.
The list will also include the 18 regulatory fees that are being refunded.
In line with the change in legislative approach, the MOF and the Inland Revenue Authority of Singapore will work closely with agencies to assess their fees, instead of allowing self-assessment by the agencies.
Mr Chee said the initial list of non-taxable fees will be published in the Gazette in end-April when the Bill comes into force.
He added that the MOF had earlier reviewed all the regulatory and ancillary fees that currently charge GST and is now working with agencies to review the remaining “more than 1,700” fees that do not charge GST.
“MOF will continue to work with agencies to progressively prescribe their regulatory fees in the non-taxable list, and we aim to complete this by September,” Mr Chee told the House.
WHAT IS GST CHARGEABLE?
Mr Chee laid out the categories of government fees that will be subject to GST.
The first, which makes up the vast majority, comprises fees paid for services provided by the government. Examples include the rental of public sports facilities, which are already levied with GST currently.
“There is no change in the treatment of these fees,” he said.
Another category includes fees that are not charged with GST now but should be taxed moving forward based on the government’s “clarified policy intent”.
These include fees for examinations that individuals must take before being issued a licence, which some agencies are currently not charging GST. Other examples include inspection fees prior to the licensing and conduct of certain business operations.
Overall, it is estimated that there are “more than 100” of such examination and inspection-related fees.
Mr Chee said the government will help to “minimise the impact” by absorbing the GST on these fees in the first instance and impose a freeze on these fees until end-2025.
MOF has also “separately asked the agencies involved to review their fees and charges, and to consider ways where they can streamline processes or reduce costs”.
“We will work closely with agencies on this to review if the above-mentioned fees may be reduced or even removed,” the minister said.
“If there are unavoidable cost increases, then agencies would have to raise their fees. But they will do so only after end-2025 and will ensure that any increases are phased in gradually, taking into consideration the impact on affected stakeholders.”
