GST Updates

Missing Trader Fraud (“MTF”)

MTF is a fraud scheme used by crime syndicates to defraud tax authorities of GST.

Effective from 1.1.2021, a GST registered trader will not be allowed to claim GST input tax on supplies made to him which he knew or should have known are part of any arrangement to cause loss of public revenue under the “Knowledge Principle” rule. Businesses would need to conduct proper due diligence of business deals and scrutinise the legitimacy of their purchases more carefully. Failure to do so may result in non-compliant businesses not being able to claim input tax on affected purchases, be subjected to detailed audit and investigation and even cancellation of their GST registration.

Businesses must have taken reasonable steps to ascertain and conclude that the goods or services were not part of a MTF arrangement, and the conclusion is one that a reasonable person would have made.

Below is a simple illustration of MTF:  

  Source of picture and illustration: Inland Revenue Authority of Singapore

GST on imported services

The following regimes were implemented from 1 Jan 2020 to tax imported services: 

1. 1. Reverse charge regime for Business-to-Business supplies (supplies made to GST-registered persons) of imported services; and
   2. Overseas vendor registration regime for Business-to-Consumer supplies (supplies made to non-GST registered persons) of imported digital services.

Reverse charge

Under the reverse charge mechanism, the following GST registered businesses would need to account for GST on all services procured from overseas suppliers, except for certain services which are specifically excluded from the scope of reverse charge: 

1. 1. a GST-registered partially exempt business that is not entitled to full input tax credit; or
   2. a GST-registered charity or voluntary welfare organization that receives non-business receipts,

The following services are exempt from the scope of reverse charge: 

• • • Services that fall within the description of exempt supplies under the Fourth Schedule to the GST Act; 
    • Services that qualify for zero-rating under section 21(3) of the GST Act; 
    • Services provided by the government of a jurisdiction outside Singapore, if the services are of a nature that falls within the description of non-taxable government supplies under the Schedule to the GST (Non-Taxable Government Supplies) Order of the GST Act; and 
    • Services that are directly attributable to taxable supplies (this exclusion does not apply to partially exempt persons who are granted a fixed input tax recovery rate or a special input tax recovery formula to be applied on all input tax claims).

The GST registered business is entitled to claim the corresponding GST as input tax where the claim is subject to the normal GST input tax recovery rules. 

For non-GST registered businesses who procure services from overseas suppliers, they would be liable for GST registration by virtue of the reverse charge rules if they satisfy the following conditions: 

1. 1. Their imported services which are within the scope of reverse charge exceed S$1 million in a 12-month period (under either the retrospective or prospective basis); and 
   2. They would not be entitled to full input tax credit if they were GST registered. 

Once the businesses are registered as GST traders by virtue of the reverse charge rules, they would need to account for GST on both their taxable supplies and the value of imported services which are subject to reverse charge.  Corresponding GST are claimed as input tax subject to the normal GST input tax recovery rules.  

Reverse charge for Business-to-Business import of low value goods

From 1 Jan 2023, a GST-registered business which is subject to reverse charge should perform reverse charge on the following low-value goods: 

1. 1. are not dutiable goods, or are dutiable goods, but payment of the customs duty or excise duty chargeable on the goods is waived under section 11 of the Customs Act;
   2. are not exempt from GST;
   3. are located outside Singapore at the point of sale and are to be delivered to Singapore via air or post; and
   4. have a value not exceeding the GST import relief threshold of S$400.

The requirement to perform reverse charge applies to all low-value goods and includes low-value goods purchased from local and overseas suppliers, electronic marketplace operators and redeliverers, regardless of whether they are GST-registered or not. 

For non-GST registered businesses, if the total value of imported services and low-value goods for a 12-month period exceeds S$1 million and they are not entitled to full input tax credit even if they were GST-registered, they may become liable for GST-registration under the new GST registration rules.

Overseas Vendor Registration (OVR) regime

The Overseas Vendor Registration Regime brings to tax business-to-consumer (B2C) supplies of digital services. With effect from 1 Jan 2020, overseas businesses are required to register for GST in Singapore if they: 

1. 1. have an annual global turnover exceeding S$1 million; and
   2. make B2C supplies of digital services (e.g. downloadable digital contents, subscription-based media, software programs and electronic data management) to customers in Singapore exceeding S$100,000. 

Once registered for GST, the overseas businesses are required to charge and account for GST on B2C supplies of digital services made to customers (i.e. individuals and non-GST registered businesses) in Singapore. A GST-registered overseas service provider will thus have to determine if a customer is GST-registered to charge GST correctly. 

With effect from 1 January 2023, the OVR regime will be extended to tax B2C supplies of imported non-digital services (e.g. professional services performed via electronic means to arrange or facilitate transactions) and imported low-value goods. 

In other words, all remote services (i.e. digital services and non-digital services) and low-value goods will be taxed under the extended regime.  The S$100,000 threshold for the purpose of determining the liability for GST registration will also apply for supplies of imported non-digital services and imported low-value goods. 

Overseas Vendor Registration (OVR) regime for imported low-value goods 

The OVR regime will be extended to include imported low-value goods in respect of B2C transactions with effect from 1 January 2023. Low-value goods is defined as goods that: 

1. 1. are not dutiable goods, or are dutiable goods, but payment of the customs duty or excise duty chargeable on the goods is waived under section 11 of the Customs Act; 
   2. are not exempt from GST; 
   3. are located outside Singapore and are to be delivered to Singapore via air or post; and 
   4. have a value not exceeding the import relief threshold of S$400.

A supply of low-value goods by a GST-registered OVR Vendor (i.e. suppliers, electronic marketplace operators and redeliverers) to a customer who is not GST registered in Singapore, will be subject to GST. 

Electronic marketplace operator

Under certain conditions, local or overseas operators of electronic marketplaces, may be regarded as the supplier of the digital services made by the overseas suppliers through their marketplaces.

In such cases, such operators are required to include the value of these services to determine their GST registration liability. Operators that are liable for GST registration or are already GST-registered, are required to charge and account for GST on B2C supplies of digital services made through their marketplaces to customers in Singapore on behalf of the overseas suppliers, in addition to digital services made by them directly to customers in Singapore.

To ease compliance burden, overseas marketplace operators will be registered under a simplified regime with reduced registration and reporting requirements. Under the simplified regime, GST input tax is not claimable.

Similar requirements apply to suppliers of remote services and low-value goods supplied through their marketplaces.