This means that Singapore consumers will have to pay tax for, say, downloading Google and Apple applications and for movie and music streaming services.
Singapore is the first government in Southeast Asia to charge GST on imported digital services. Malaysia is also considering such a move.
Last year, Malaysian Customs Department director-general T Subromaniam was reported as saying his department had proposed amendments to the Goods and Services Tax Act to incorporate the digital economy and e-commerce transactions.
It was previously reported that other nations in Southeast Asia looking at introducing a similar tax included Thailand and Indonesia.
Singapore’s Finance Minister Heng Swee Keat, in his 2018 budget speech on Monday, said GST would be extended to imported online services.
“Today, services such as consultancy and marketing purchased from overseas suppliers are not subject to GST. Local consumers also do not pay GST when they download apps and music from overseas. This change will ensure that imported and local services are accorded the same treatment,” Heng said.
Heng also said the GST would go up from 7% currently to 9% sometime in the period between 2021 and 2025.
The exact timing for the GST increase would depend on the “state of the economy, how much our expenditures grow and how buoyant our existing taxes are”, he said.
According to a report in Channel NewsAsia, the GST on digital services targets two categories of services: Business-to-business (B2B) types such as marketing, accounting, IT and management, as well as business-to-consumers (B2C) ones such as video and music streaming, apps, listing fees on electronic marketplaces, software and online subscription fees.
It quoted analysts as saying digital service providers would face increased operational costs for compliance with the new tax regime and that it could dampen the growth of digital services in Singapore, at least until people got used to it.
About 1,000 companies offering B2B digital services, as well as 100 firms in the B2C space, are expected to be affected by the new tax, Channel NewsAsia said.
It quoted Gan Hwee Leng, tax partner at KPMG Singapore, as saying the implementation of GST for imported services aligned Singapore’s GST framework with those of other countries, and put local and overseas service providers on a level playing field.