What You Need to Know About The New GST Rate From Jan 2024—Which Businesses Are Absorbing the Extra GST?

Living in Singapore has just gotten costlier with the Goods and Services Tax (GST) rate leaping from 7% to 8% last year and then again to 9% starting January 1, 2024. Along with inflated prices in cost of living, these changes bring about new financial implications. 

Staying here means evolving our spending strategies to become cost-savvy. Some are embodying the kiasu spirit by making bulk purchases before the GST change, while others are directing their shopping towards businesses that are absorbing the additional GST.T

Take Mr Chua Jun Wei, a 34-year-old lawyer, settling into his new home in 2024. On December 28, he visited Audio House not solely to alleviate the impact of the GST hike, but also to seize some fantastic end-of-year bargains. By shelling out $10,000 on electronics and furniture in one day, he managed to save a remarkable $5,000 due to the offer discounts.The rise to 9% adds an extra pinch to the financial pressures we’re already experiencing. The inflation rate jumped from 1.2% in 2022 to 2.5% in 2023. 

Understanding what this tax increase means for us is crucial. Sure, stocking up before a GST hike might seem like a savvy move, but it could also lead to spending more than necessary. So let’s take the time to fully understand what the tax increase means and plan our shopping sprees carefully to avoid any unnecessary strain on our wallets.

 

What GST hike countermeasures has the government implemented?

The GST increase is geared towards funding essential societal needs such as healthcare, senior citizen welfare, and the expansion of healthcare initiatives and community programmes.

To soften the blow of this GST hike, the government has introduced what they’re endearingly calling the Assurance Package, akin to a financial safety net. 

• It hit the ground running in Budget 2022 with a robust $6.6 billion, cranked it up a notch to $9.6 billion in Budget 2023, and then amped it up to over $10 billion in September 2023.
• For the majority of Singaporean households, it will shoulder extra GST expenses for a solid 5 years.
• Households on the lower end of the income spectrum can anticipate this coverage to last roughly an entire decade.
• Singaporean adults (21+ in 2024) will receive a cash bonus in December 2023, ranging from $200 to $800.
• Around 2.9 million adults are slated to receive up to $600 in AP Cash.
• An extra 2.5 million will be eligible for an additional AP Cash Special Payment of up to $200.

Don’t overlook the GST Voucher Scheme and GST-free publicly subsidised education and healthcare. Particularly for those in the lower to middle-income bracket, these benefits are here to stay. 

 

Which businesses are absorbing the additional GST?

As we all gear up to embrace this change, it’s important to give those price tags, both online and in physical stores, a second look. Unless your services and products are purchased in 2023, most of the retailers should have adjusted to the newly minted GST of 9%. 

Note that hotels and F&B establishments that charge a service fee are not required to include GST in the displayed service prices. However, they must keep customers informed about additional GST and service charges.

Despite the increase, some businesses are stepping up to cushion the impact for everyday consumers like you and me. Here’s a list of popular merchants who are absorbing the additional GST for a certain period of time:

• 7-Eleven is covering the GST increase for all products under its homegrown ‘7-Select’ label.
• Birds of a Feather has committed to covering the GST increase throughout 2024.
• Changi Airport is also pitching in with participating retail outlets in the public areas of  T1 to T4 absorbing 9% GST for Changi Rewards members for the whole of 2024. Some of the popular names include WH Smith, Eu Yan Sang, Guardian, and Bengawan Solo. The Changi Rewards membership is free and there’s a slew of other deals available—check them out here.
• Cold Storage is also taking on the GST increase for over 600 everyday items during the same time frame.
• FairPrice is freezing prices on 100 house-brand items until the end of 2024 to mitigate the impact of the GST hike.
• Giant is absorbing the GST increase for 700 essential products from January to June 2024.
• Guardian is offering a 7% discount on all products from January to June 2024 to offset the GST increase at all outlets.
• IKEA Singapore is covering the additional GST cost for all furniture and fixtures throughout the entirety of 2024.
• Sheng Siong is providing a 3% store-wide discount to help customers offset the GST increase.

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READ MORE: Singaporean Households to Receive $500 CDC Vouchers in 2024: How to Claim, Where to Spend Them, Etc.

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How is GST calculated for goods and services crossing into the new year?

Before you hit the shops, take a moment to review your past purchases. Here’s some essential insight on the GST increase: it’s all about timing.

The application of the increase depends on when the services are performed or when the invoice is issued, whichever comes first.

• If you had services performed in 2023 but only got your invoice in 2024, you’re in luck! The GST rate will remain at 8% because the services were carried out the year before the rate increased.
• Conversely, if both the services and invoicing occur in 2024, the GST rate will be a solid 9% as the increase has already taken effect.
• What if you received your invoice in 2023 but the services were provided in 2024? Interestingly, the GST rate will still be 8% because that invoice was issued before the rate increased.
• For instalment plans that you’re servicing over several years, each payment will be charged at the prevailing GST rate when you are due to make your repayments. 

Here’s an example: James, a barber, experienced an influx of customers towards the end of 2023. Here’s how the GST for his services is calculated based on various payment scenarios

❗Remember, this applies to everyone, both businesses and consumers. You don’t want to be overcharged. Keep a watchful eye on the dates when services are provided and invoices are issued to determine the applicable GST rate. 

 

Be cautioned not to fall for GST hike pressure tactics

While it’s true that the hike in GST may mean more expenses for both businesses and consumers, it’s essential to stay alert to potential unfair practices from businesses and market trends attempting to profit from this situation. 

Don’t let flashy ads, driven by time sensitive calls to action, trick you into buying stuff you don’t need. For instance, a 1% discount or $20 voucher doesn’t usually tempt you to splurge on a larger ticket item like a $2000 computer. All the more, the 1% GST increase shouldn’t faze you. Your financial goals should come first!

Here are other things consumers should look out for:

• Identify businesses that are absorbing the GST increase
  Keep tabs on announcements from businesses about their GST policies. Some may choose to absorb the increased cost, saving consumers from paying extra.
• Monitor your invoices
  Always check the date and GST rate on your invoices. If a service was provided or an invoice was issued before the rate increase, the old GST rate should apply.
• Plan your purchases strategically
  Consider buying in bulk or advance purchasing for items not immediately needed to take advantage of the lower GST rate. However, always be mindful of your budget and avoid unnecessary purchases.

Businesses, protect yourself too:

• Decide on absorbing the GST increase
  Consider whether it’s feasible for your business to absorb the GST increase, or if you need to pass this cost on to your customers. This could depend on factors like your profit margins and competitive landscape.
• Update systems and processes
  Review your invoicing, accounting, and pricing systems to ensure they are updated with the new GST rate. This might involve adjusting pricing on your products or services or updating your invoicing templates.
• Automate tax procedures
  Consider using automated solutions for tax procedures to ensure compliance with the new GST rate. This could involve software that automatically calculates the correct GST amount on invoices.
• Utilise GST relief plans
  If eligible, take advantage of schemes like the Major Exporter Scheme (MES) and the Zero-GST Warehouse Scheme (ZGS), which can provide relief from the GST increase.
• Review your pricing strategy and financial projections
  Given the increase in the GST rate, it might be necessary to revisit your pricing strategy. Also, review your financial projections to account for the potential impact of the increased GS

Feeling the pinch?

Navigating this new landscape requires care and attention. This entails getting a handle on the GST increase effects, giving price tags a closer look, and prioritising budget-friendly options. In times like these, it’s key to strategise smartly and consider the bigger financial picture.

 

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