Introduction of the Goods and Services Tax



The Goods and Services Tax (GST) is a tax on domestic consumption.[1] It was introduced in Singapore on 1 April 1994 at the rate of 3 percent; it was then increased to 4 percent from 1 January 2003, 5 percent from 1 January 2004 and 7 percent from 1 July 2007.[2] It is a 'multi-stage' tax that is collected at every  stage of the production and distribution chain.[3] The tax is paid when money is spent on goods or services, including imports.[4] However, the sale and lease of residential properties, financial services and exports of goods and international services are exempted from this tax.[5]

The introduction of GST was part of a government reform intended to shift taxes from an income-based to a consumption-based system in order to boost Singapore's international competitiveness.[6] The additional revenue collected from GST allowed  for reductions in individual and corporate income tax rates as well as in property tax rates.[7] A further advantage is that a consumption-based tax system creates a more resilient tax base as the population ages.[8]

The GST rate is applied across-the-board even on basic goods and services.[9] In a bid to mitigate the cost impact of the GST, the government introduced a slew of measures between 1993 and 1994 to help Singaporeans cope. These included reductions to existing taxes such as the top personal income tax rate and taxes on motor vehicles, increased grants for lower-income households, and increased subsidies for some public services such as health and education.[10] The Economic Restructuring Shares scheme was introduced in January 2003 to tide Singaporeans over during the five-year period from 2004 to 2008 and help nullify the effects of the GST increase. The shares, each worth S$1, were given to all Singaporeans over three allocations, with the first payout on 1 January 2003.[11]

Tourists to Singapore can obtain a refund of the GST paid on goods purchased from retailers who participate in the Tourist Refund Scheme (TRS). However, the refund applies only to tourists who are bringing their purchases out of Singapore via Changi Airport or Seletar Airport within two months from the date of purchase, and to tourists who are departing Singapore on international cruises.[12]

1. The goods and services tax (p. 1). (1993). Singapore: Ministry of Trade & Industry and Ministry of Finance. Call no.: RSING 336.2714095957 GOO.
2. Henson, B. (2002, December 6). GST hike in two steps; reliefs stay. The Straits Times, p. 1; 1% GST hike to go ahead. (2003, August 29). The Straits Times, p. 1; Soh, N. (2007, June 30). Changes from July. The Straits Times, p. 87. Retrieved from NewspaperSG.
3. The goods and services tax, 1993, pp. 1–2.
4. The goods and services tax, 1993, p. 1.
5. Inland Revenue Authority of Singapore. (2013, March 11). How does GST Work. Retrieved October 7, 2013, from IRAS website:
6. The goods and services tax, 1993, pp. 6–9.
7. The goods and services tax, 1993, pp. 7–8.
8. The goods and services tax, 1993, p. 8.
9. The goods and services tax, 1993, pp. 19–20.
10. Reduced taxes for vehicles, no increases for liquor and cigarettes. (1994, February 24). The Straits Times, p. 2; Top personal income tax rate reduced to 30% in major trade-off. (1993, February 27). The Straits Times, p. 13; Tan, C. (1993, February 19). Higher govt grants to help lower-income with increases in charges. The Straits Times, p. 1. Retrieved from NewspaperSG; The goods and services tax, pp. 21–22.
11. Kan, F. (2002, May 4). Restructuring shares to ease the pain. Today, p. 2; New S'pore Shares in Nov. (2001, October 13). Today, p. 2. Retrieved from NewspaperSG.
12. Inland Revenue Authority of Singapore. (2013, September 30). Tourist Refund Scheme. Retrieved October 7, 2013, from IRAS website:

Rights Statement

The information in this article is valid as at 2014 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.