Now that we’re supposed to have “gotten used to” Covid life, the government has decided that it’s time to stop acting nice and coddling us with handouts. PM Lee hinted on 31 Dec that the much-feared GST hike will happen. On the 18 Feb 2022, Minister of Finance Lawrence Wong announced that the GST increase from 7% to 9% will begin in 2023 in two stages:
GST increase from 7% to 8% on 1 Jan 2023
GST increase from 8% to 9% on 1 Jan 2024
Singaporeans have been divided on the subject. For obvious reasons, most people aren’t exactly jumping for joy that everything will cost 2% more.
But there are a well-heeled few who are boasting that they were charged 19.6% GST when shopping in Monaco, 22% in Milan, and 10% in Australia and South Korea and that the impending 9% GST is nothing. If that’s you, come I clap for you.
What is GST?
Goods and Services Tax is a consumption tax that is charged on most goods and services in Singapore as well as imported goods. GST is a common type of tax that is used all over the world, with some countries calling their GST Value-Added Tax or VAT.
Most goods and services in Singapore are affected by GST. This includes everything from restaurant meals, massages at spas and Uniqlo tshirts.
All businesses whose turnover exceeds $1 million must register for GST. For the rest, it’s optional. Once GST-registered, businesses are authorised to charge their customers GST.
That means that when you shop at a GST-registered business, you might find 9% GST added to your bill, or be charged prices that are “inclusive of GST”.
Non-GST-registered businesses are not allowed to charge GST directly. But that doesn’t mean that the business isn’t incurring costs due to GST—they might still have to pay GST on imported supplies or any goods and services purchased from other businesses in Singapore. Although they can’t charge GST upfront, they can still indirectly pass GST on to their customers by hiking up the price of their products.
There are a few goods and services on which GST is not chargeable. These include things like unfurnished residential property rentals, importation of investment precious metals and financial services. So, you don’t have to pay GST if you rent a bedroom in someone’s HDB flat or invest in gold.
How to calculate GST?
At restaurants, GST is usually added to the bill. That makes it tricky when splitting the bill with friends, because everyone needs to pay not only the price of the dishes they ordered but also the GST and service charge tacked on at the bottom of the bill.
Let’s say you dine with three of your colleagues at a restaurant and walk away with a $92.98 bill, which you rush to pay with your credit card in order to take advantage of cashback. The problem is, you now have to take on the unenviable role of debt collector, making sure everyone pays you back.
Here’s what your bill might look like:
|
Jin Ho Jiak (JHJ) Restaurant |
|
|
Date: 02/02/2022, 12:48pm |
|
|
Table 15 |
|
|
Description |
Amount |
|
Iced Coffee |
7.00 |
|
Ice Latte |
7.00 |
|
< Soy Milk |
1.00 |
|
Tofu Salad |
19.00 |
|
Açai Bowl |
18.00 |
|
Aglio Olio (Prawn) |
15.00 |
|
Pasta Pomodoro |
12.00 |
|
Service Charge 10% |
7.90 |
|
GST |
6.08 |
|
Total $ |
92.98 |
|
Card – Master Card |
-92.98 |
Let’s say your colleague Mr Kiasu ordered an iced coffee ($7) and an açai bowl ($18). The cost of his food adds up to $25 ($7 + $18). But how much service charge and GST should he pay?
Many people think they should just multiply the bill by 17% and they’ll get the total cost of the 10% service charge and 7% GST. But that’s incorrect. Service charge is 10% of the cost of the food, and GST is 7% of the cost of the food and the service charge.
So, the first thing you should do is to calculate service charge, which is 10% of the cost of the dishes ordered. So, Mr Kiasu should be paying $2.50 ($25 x 10%) in service charge.
Next, you apply 7% GST to the entire bill, including service charge. Mr Kiasu’s share of the GST is thus about $4.38 ([$25 + $2.50)] x 7%).
In total, he should pay about $29.43 ([$25 + $2.50) x 107%).
If you’re not a fan of math, you can use an online GST calculator, but remember to include the 10% service charge.
How much is GST currently in Singapore?
At the time of writing, GST is currently 7%, but the government plans to raise it to 8% on 1 Jan 2023 and up to 9% on 1 Jan 2024.
When was the last GST hike?
GST has been around since 1994, and started at the very tame rate of 3%. Here’s how it has evolved over the years to become the monster it is today.
| Year | GST rate |
| 1994 | 3% |
| 2003 | 4% |
| 2004 | 5% |
| 2007 | 7% |
| 2023 | 8% |
| 2024 | 9% |
GST Voucher 2022 payout date
GST is a regressive tax, which means it disproportionately affects the poor, who spend a higher fraction of their income on goods and services. It was actually implemented in order to enable Singapore to lower its corporate and income tax rates, effectively shifting the burden of generating tax revenue to the poor.
Obviously, that’s going to make some people quite unhappy. So the government periodically distributes GST vouchers in order to alleviate some of the burden of paying GST. GST vouchers are distributed according to the value of one’s home, which is a (flawed) way to ensure that lower income households get more.
The first GST payout of 2022 came in January in the form of GST Voucher U-Save rebates, distributed to 950,000 HDB households in order to offset utility bills. Households living in 1-, 2- 3-, 4-, 5-room and executive or multi-generation flats with no other property received $55 to $95 worth of vouchers. U-Save vouchers are distributed four times a year, so there are more on the way.
Other GST-related payouts to look forward to include the upcoming GST offset package, the yearly GST cash voucher which is paid every August to Singaporeans living in homes with an annual value of not more than $21,000, and MediSave top-ups for elderly Singaporeans aged 65 and above, also made every August.
Want to know more about how you can save on GST? Here are some money-saving tips if you’re travelling and shopping abroad soon!