GST increase in Singapore

As we welcome 2023, one thing that probably most of us aren’t all that excited about is the increase in the Goods and Services Tax (GST), from the current 7% to 8%.

In case you already didn’t know, this GST increase was originally scheduled for 2021. However, because the pandemic was still rampant then, this was deferred until 2023. Of course, it doesn’t stop there; come 2024, expect the GST to increase by a further 1%, bringing it to a whopping 9%.

Given that the last GST increase to the current 7% was all the way back in 2007, most of us might not have fully figured out how the increase will impact us. Here are some things you need to know about the upcoming increase, as well as some scenarios that might affect you.

Changes to GST at a glance

As we’ve all probably figured out by now, a 1% increase in GST basically means things increasing 1% in price. Merchants like shops, restaurants, and those offering services will factor in this increase come 1st Jan 2023, so don’t be too shocked if you realise your usual $10.90 plate of food now costs 10 cents more.

Another change to GST that perhaps not everyone might know about is how, GST will also be applied to low-value goods bought from overseas that are brought in via air or post – such as the items you buy online. Currently, these “low value” goods – defined as items with a value of less than $400 – are exempt from GST, however that’s set to change come 2023. 

Items you order from overseas with a value less than $400 will be subject to 8% GST.

According to the Government, the reason for this implementation is so that it will “help to level the playing field for local businesses to compete effectively”, else they’d lose out to overseas retailers and vendors.

There’s more. GST will also now be applied to all types of non-digital services, including those from overseas. This includes the likes of telemedicine, online counselling, and distance learning classes from educational institutes, for example. 

Here are some other common scenarios that you might face with regard to purchases, and how the increase will affect that scenario:

Buying items overseas and bringing them back to Singapore

As a fair number of us scoot off for exciting holidays this year-end, remember that GST is not just applicable for stuff bought in Singapore, but even for things that you buy overseas and bring back to Singapore.

In a nutshell, if your trip is longer than 48 hours, you will get GST relief of up to $500, and be taxed for the amount after that threshold. For example, if you bought a laptop for $1,400, you’ll get GST relief for the first $500, and taxed the prevailing rate for the remaining $900. If your trip is less than 48 hours, then the relief is up to $100 in value.

For this scenario, it’s pretty straightforward. If you purchased the item while on holiday before 1 Jan 2023, it’ll be subject to 7% GST. After that, it’ll be subject to 8% GST. If you purchased the item before 1 Jan 2023 and only arrive back in Singapore after that, it’ll be subject to 7%.

Items paid for in 2022 but will only be received in 2023

In some instances, you may have paid for an item in 2022 but will only receive it in 2023 – for example, pre-ordering of items.

Pre-ordered furniture? You won’t be subject to the GST increase.

The GST you’ll have to pay for your item will first depend on its value. Remember, as of right now goods that are valued at under $400 are exempt from GST, and goods above that would already be taxed at the current 7%. And so for the latter, it doesn’t matter when you receive it.

Assuming that the goods you’re buying is above $400, if you’ve made full payment for them before 2023 and will only receive the goods after, the GST charged to you will still be kept at 7%.

Deposit paid for in 2022 but remainder paid in 2023

Some of us might have put down a deposit for a large-ticket item in 2022, and plan to only pay the remainder after 1st Jan 2023 – such as wedding packages and furniture.

In this case, calculating the amount of GST is quite straightforward. For your deposit paid in 2022, you’ll just have to pay the current 7%, as well as any other payments that you plan to make to chip away at the remaining amount. After 1st Jan 2023, the remaining amount you owe will be subject to the new GST rate of 8%.

That being said, it’ll be best to read the fine print on any terms and conditions that come with your purchase. 

For instance, some retailers might generously offer to “lock” you into the 7% for the entirety of your purchase, as a means to attract you to finalise on your purchase. In that case, what they are essentially doing is to help absorb that 1% increase, because they’ll still have to pay 8% to the government, but you’ll only have to pay 7%.

Items paid for in installments that run into 2023

Another popular scenario that might occur are instalment plans. After all, with the growing popularity of buy-now-pay-later platforms, consumers can split up the payment of items into tranches just to make it easier on the wallet.

In short, any instalment payment that you make before 1st Jan 2023 will be taxed at 7%, and any subsequent instalment payments after 1st Jan 2023 will be at 8%. This is with the assumption that you made the purchase in 2022, with the expectation that the item will only be delivered in 2023.

However, if you receive your item before 1st Jan 2023, then all subsequent installments will be pegged at 7%, even if you’re paying for them in 2023.

Invoiced in 2022, but payment and goods received only in 2023

For example, if you’ve signed an invoice for a reno but work and payment will only start in 2023.

For some purchases, the supplier may first invoice you first in 2022, however for one reason or another, you’ll only pay and receive the goods after 2023.

In this case, the initial invoice will rightfully reflect it as 7% GST. However, if you only make full payment and receive your items only in 2023, then you will be liable to pay 8% GST. The supplier will have to cancel the original tax invoice and issue a new one that will reflect a GST of 8%.

Upcoming GST changes in Singapore

To help consumers, IRAS has very kindly published a flowchart to help people understand the various scenarios, and how the GST increase might affect them:

Image adapted from: IRAS

Image adapted from: IRAS

Navigating through the GST increase

With less than a month to go before the GST increase and the new rules kick in, you may be wondering how to “save” as much as possible.

The easiest way would be to pay off all of your expected or existing purchases in 2022, so that you’ll pay the existing rate of 7% for as much as possible and thus reduce the amount that’s subjected to 8%. 

Granted, a 1% difference might be that much of a big increase in the grand scheme of things, but it certainly wouldn’t harm to save wherever we can. And so, where possible, aim to pay off your purchases as much as possible before 1st Jan 2023, and consider not holding off on big-ticket purchases if you can afford it.

Concerned about how else you can manage and tide through the initial stresses caused by the GST increase? Read more about the Government’s Assurance Package payouts, and how the scheme will benefit you in cushioning the impact of the increase in prices from 2023.

Find out more about GST on IRAS here

Read more beginner-friendly finance articles here:

• Singapore Savings Bonds 
• Guide to personal loans in Singapore
• Cost comparison of getting a car in Singapore