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How to be savvy over GST increase: Experts share ways to manage higher prices

Examples include paying for planned expenses and big-ticket items before the year ends

Shopping for electronic appliances
Consider shopping around and comparing prices before you buy products. This can help you reduce unnecessary spend. ST PHOTO: MARK CHEONG

December is usually when Ms Jamie Ng tends to splurge. The 28-year-old project manager spends the festive season buying gifts for loved ones, enjoying Christmas feasts and parties, and travelling.

This year is slightly different. While she still plans to celebrate and party, Ms Ng says she’s paring down on lavish gifts. She is also not travelling.

“I still buy gifts for my family and friends, of course, but I set a specific budget and stick to it,” says Ms Ng.

“I bought my presents earlier this year instead of leaving it to the last minute, so I could make use of online shopping vouchers to offset the price and still receive the items in time.”

Ms Ng, who lives with her parents in a five-room Housing Board flat, is more prudent because she plans to rent her own apartment next year.

“I’ve definitely been affected by high inflation and rising prices, but I’m not going to let that derail my plans. So I’m just trying to save however I can now.”

She’s also concerned about the upcoming Goods and Services Tax (GST) increase, which will go up by one percentage point from 7 per cent on Jan 1.

“I know I would probably need new furniture when I move out, and I wish I could buy now so I don’t have to pay for higher GST, but I just don’t have anywhere to put it,” she says.

Singapore’s core inflation – which excludes accommodation and private transport – has been steadily rising, reaching 5.3 per cent in September, before dipping to 5.1 per cent in October.

“After five rounds of tightening by the Monetary Authority of Singapore (MAS), and visible signs of global inflationary pressure abating, price pressure within Singapore appears to be easing,” says Mr Irvin Seah, senior economist, DBS Bank.

But next month’s GST hike will offset the trajectory of inflation readings for the next year, he adds.

The MAS expects core inflation to stay elevated over the next few quarters, before slowing more discernibly in the second half of next year.

The $8 billion Assurance Package, which aims to help households cope with rising costs and the impact of the GST hike, will help. "It will essentially offset the GST paid by lower to middle-income households significantly," says Mr Seah.

“So while the GST increase will push headline inflation higher, the impact on the majority of Singaporeans, after taking into account the offsets from the Assurance Package, will be relatively lower."

What about the second stage of the GST increase, which will see it raised from 8 per cent to 9 per cent in 2024?

“Though the GST will be hiked further in 2024, global inflationary pressure is expected to be more subdued by then, given the tightening in global monetary policies over 2022 and 2023,” says Mr Seah.

Still, it makes sense to be financially prudent. “While a one to two percentage point hike might seem small,” says Ms Lorna Tan, head of financial planning literacy, DBS Bank, “consumers may start to feel the impact when the increases of GST on cost of production is passed on from suppliers and store-holders to them.”

Will it be more daunting to manage budgets? Not necessarily. Some of her tips on coping with the GST increase can be as simple as ABC:

Adjust your spending

With the elevated inflationary environment and impending GST hikes that will kick in next month and in 2024, you should monitor your spending and adjust your budget if needed.

DBS’ Ms Tan recommends: “Make it a habit to review your budget-and-spend categories monthly to make necessary tweaks.”

Digital tools like the DBS Nav Planner can also help you keep track of your expenses and set up a realistic budget that includes saving and spending targets.

Be aware

Be aware of ways you can stretch your dollar, says Ms Tan.

For example, if you have planned expenses such as home renovation, annual payments or big-ticket items that you need, consider buying them before the year ends. This way, you can avoid paying more due to higher GST.

“As a consumer, you may order an item or sign up for services but only pay at a later date. If you pay for the goods and services before 1 Jan 2023, the GST rate will still be charged at 7 per cent,” says Ms Tan.

In Singapore, only businesses that exceed $1 million in annual taxable turnover are required to charge GST.

“When making purchases of goods and services, you may want to seek out small businesses that you can support, which may also mean not spending extra on GST.”

She gives examples such as visiting smaller-scale fitness studios instead of international brand gyms, buying groceries from the wet market instead of the supermarket, and purchasing baked goods from home-based bakeries instead of established F&B outlets.

Compare and calculate

The increase in GST over the next two years may seem gradual and small, but there is a long-term impact on our financial wellness, says Ms Tan. “The implications of having to pay more on a daily basis means there will be less to save and invest.”

Shop around and compare prices of products and services before making an informed purchase, she advises. This will go a long way in reducing unnecessary spend.

If you’re shopping for products online, consider the GST applicable too. Starting next month, you will also need to pay GST on purchases of goods worth up to $400 imported by air or post from GST-registered suppliers or platforms.

Currently, this only applies to goods worth $400 and above imported by air or post.

To better plan your finances, you can make use of digital tools like the DBS NAV Planner to help you calculate and simulate your cash flow projections to achieve your short-, mid- and long-term goals, including retirement needs.

This feature was produced in partnership with

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