Extent of impact of GST on imported services still unclear: Experts
The new goods and services tax (GST) to be imposed on imported services in 2020 will hit financial institutions and some developers in particular, but the extent of the impact is still unclear, say experts.
Local firms are increasingly purchasing services such as software applications from overseas, but they do not pay GST if the provider of the services does not have a presence here.
Once the tax is imposed, services imported by businesses will be taxed by what is called a reverse charge mechanism.
This would force firms to pay GST for services from overseas suppliers, and allow these firms to make input tax claims.
Mr Koh Soo How, Asia Pacific indirect tax leader at PwC Singapore, expects the overall revenue to be collected from GST on imported services to be sizeable.
We are unable to ascertain the new measure’s full impact... but based on our preliminary assessment, we do not expect it to be significant.Ms Jane Lim, head of group tax at OCBC Bank
"And this can only grow with the rapidly expanding digital economy," he added.
Imported services amounted to $225 billion in 2016, Singapore Department of Statistics data showed.
Finance Minister Heng Swee Keat said in his Budget speech on Monday that a new GST on imported services will apply to overseas suppliers without an establishment here.
These will include digital business-to-business services such as marketing, accounting, IT and management services, and business-to-consumer services like video and music streaming, apps, listing fees on electronic marketplaces, software and online subscription fees.
Most of the large corporates The Straits Times spoke to said it is still too early to properly assess what impact this will have.
Ms Jane Lim, head of group tax at OCBC Bank, said the bank procures various services from overseas, including legal, consulting, IT, data and brokerage services from the United States, Europe and Asia.
"We are unable to ascertain the new measure's full impact... but based on our preliminary assessment, we do not expect it to be significant," she said.
Singtel said it is working with its content partners to look into the impact of the policy.
United Overseas Bank economist Francis Tan said the impact may be felt deeply by start-ups and small and medium-sized enterprises.