We thank Mr Lim Tong Wah for his letter ("Exempt GST on water tax amount"; Aug 6) on water consumption being subject to both the water conservation tax (WCT) and goods and services tax (GST).
The WCT and GST serve different purposes. The WCT is levied on all water consumers, to reflect the fact that water is precious, and to encourage every individual and company to play a role in conserving our water resources.
When the WCT is added to the water tariff, consumers are paying the long-run marginal cost of water: What it costs to produce the next drop of water from our desalination and Newater plants.
The GST is a tax levied on the consumption of goods and services. It is computed based on the final price of the goods and services, inclusive of any other taxes or duties. This is consistent with the practice in other nations.
What remains important, however, is that we keep our system of taxes and subsidies fair, with greater support for the lower- and middle-income households.
For example, the GST is accompanied by permanent schemes such as Workfare and GST Vouchers. The latter has a Utilities-Save component which provides rebates to over 800,000 households each year to offset their utility bills, with more rebates for those living in smaller HDB flats.
George Madhavan
Director, 3P Network, PUB
Lim Yuin Chien
Director, Corporate Communications
Ministry of Finance
