• From 2023, Consumers would likely have to pay a 7 or 9 per cent GST when they buy low-value goods or non-digital services from overseas sellers
• Tax experts said consumers have to be aware that the price displayed on websites may not be the final cost they pay
• They also said that it is likely an online marketplace such as Lazada may collect GST on behalf of the many overseas vendors on their platforms
• While it is not possible to ensure total compliance, tax experts said big companies will tend to comply for reputational reasons

SINGAPORE — In about two years, consumers in Singapore will have to start paying Goods and Services Tax (GST) on any item bought online directly from an overseas seller or through an online marketplace, which are then shipped by air or post here.

Not only that, they will have to also fork out GST if they pay for non-digital services such as live interaction with overseas providers of educational learning, fitness training, counselling telemedicine and others. 

These impending changes were announced by Deputy Prime Minister and Finance Minister Heng Swee Keat on Tuesday (Feb 16) during the Budget 2021 statement in Parliament. 

Mr Heng said that this move will “ensure a level playing field for our local businesses to compete effectively”.

“Overseas suppliers of goods and services will be subject to the same GST treatment as local suppliers,” he added.

As it stands, GST is applied to digital services bought from overseas providers, which include video and music streaming services, applications, software and online subscription fees. This came into effect from Jan 1 last year.

For the next lap, here are some of the things to note if you shop online on a regular basis. 

HOW GST WILL AFFECT ONLINE SHOPPERS

Tax experts contacted by TODAY said that consumers will likely have to bear the full cost of the GST, which is now 7 per cent but may be raised to 9 per cent by the time the new rule comes into effect. 

Mr Kor Bing Keong, tax partner at PwC Singapore consultancy, said that overseas vendors will probably not absorb the GST because it will be a hefty cost for them. They are likely complying with similar taxation imposed by other jurisdictions as well. 

This means that consumers whose online buys are below S$400 will have to pay GST in addition to the price of the items and the delivery costs. This applies whether they shop directly from the merchant’s site or through a middleman online marketplace.

Mr Yeo Kai Eng, indirect tax leader at consultancy firm EY, said: “Bottom line is, come 2023, assuming an online marketplace is registered for GST, anything you buy through that marketplace, GST will be charged.”

The tax experts said that some online shopping behaviour might change after this new rule is in force.

Mr Richard Mackender, tax partner at professional services firm Deloitte, said that GST cost will likely become apparent at the point of ordering, that is, after the customer has provided a billing address showing Singapore. 

Given that many consumers compare prices at various websites now before making their purchase, they may no longer be able to do such comparisons so easily. They will have to go through a few more steps until they see the final charges when they check out and the GST cost is reflected.

Other factors that could complicate the buying process include whether these items are delivered via air and post or land and sea, and the origins of the goods. 

Goods shipped via land and sea are not affected by the new ruling as they are already taxed, regardless of their values. 

However, Mr Kor of PwC Singapore noted that some consumers are already doing such inaccurate price comparisons. For example, consumers who buy items that cost more than S$400 would find that they have to make another payment for the GST once their items enter Singapore. This is even though the price is not reflected upon purchase on the website. 

WHO WILL COLLECT THE GST

Taking reference from the GST imposed on digital services when consumers buy from overseas vendors, the tax experts said that the same rules will likely apply for the 2023 change.

This means that overseas vendors that have a global annual turnover of more than S$1 million and more than S$100,000 revenue from customers in Singapore will have to register as an overseas vendor with the Inland Revenue Authority of Singapore (Iras). 

Overseas vendors that meet this threshold, including those providing non-digital services to consumers, will have to comply and register themselves from Jan 1, 2023. 

This also includes overseas online marketplaces such as Taobao, which will charge, collect and remit the GST on behalf of the numerous overseas sellers on the platform at the time the Singapore consumer makes payment. 

“This will mean that the overseas vendor will not have to register and deal with the compliance, and it also means that Iras has a stronger GST control process, because it is monitoring the compliance of a few marketplaces, not plenty of relatively small foreign vendors,” Mr Mackender of Deloitte said. 

The same will also apply to online marketplaces that have an operation here such as Shopee, Lazada and Qoo10, since they would have already been GST-registered entities. 

In response to queries from TODAY, Lazada said that it supports the Government’s commitment to build an e-commerce economy that protects the interests of consumers and businesses.

“We will comply with local tax regulations and collaborate with legislators on digital tax initiatives that equitably benefits all relevant stakeholders including the small- and medium-sized enterprises that sell on our platform,” it said.

Qoo10 said that this move will bridge the price disparity between the Singapore and overseas merchants on its platform and help sellers here be more competitive. 

“Qoo10 will prepare our platform for the new taxation and we believe that the timeline of two years would be enough to make the necessary adjustments,” it said. 

HOW TO ENSURE COMPLIANCE

Tax experts told TODAY that there is no sure way tax authorities can ensure that overseas vendors will comply with the new tax requirements fully. 

However, Mr Loh Eng Kiat, tax practice leader at accounting firm Baker Tilly Singapore, said that the broad consensus is that larger businesses will do their utmost to satisfy their obligations so that they will not be perceived negatively by the public. 

“A related school of thought is that the authorities need not take a dogmatic approach: By simply fostering compliance from a smaller number of (larger) sellers, it could conceivably collect a significant proportion of the tax revenue at stake,” he added. 

Another way of ensuring compliance is when non-compliant taxpayers get prosecuted and the case is covered by the media, which will contribute to reputational issues for the suppliers. 

Mr Kor of PwC Singapore said that the tax authorities from various jurisdictions do exchange information with one another. 

However, current legislations do not give Iras power to stop non-compliant overseas suppliers from selling to Singapore-based consumers, he said.