Some consumers worry about feeling pinch despite staggered GST hike, payouts to cushion impact

Mr Luqman Hakiim Sahlan with his wife Nadiah Aswen and their two sons. ST PHOTO: LIM YAOHUI

SINGAPORE - The impending goods and services tax (GST) hike is weighing on some consumers' minds even as the Government's payouts will help cushion the impact for several years.

Although the hike is not immediate, households and consumers said it will add to daily expenses eventually, which is worrying given that the cost of living is already rising.

The GST rate will increase from 7 per cent to 9 per cent in two stages - one percentage point each time on Jan 1 next year, and Jan 1, 2024.

However, Finance Minister Lawrence Wong on Friday (Feb 18) announced several measures to cushion the blow of the GST hike for ordinary Singaporeans, including a $6.6 billion Assurance Package, as well as a beefed-up permanent GST Voucher scheme.

One of those concerned is Mr Luqman Hakiim Sahlan, 28, an executive at a hospital who has two young sons aged two, and 10 months old.

"Naturally, consumers will be worried. For us, we have two young children so we have to pay for things like diapers and milk," he said.

The family is currently staying with his parents. Mr Luqman foresees larger expenses soon as the family is moving to a new Housing Board flat in September.

He said: "The grants will help us, but the impact of the hike is not clear yet. We budgeted about $30,000 to $40,000 for our home renovation, but we will have to relook it later to see if we can save more."

Recent home owners, like Ms Shameni Thambyrajah, 35, are also worried about the rise in taxes.

Ms Shameni, who is single and works in the oil and gas industry, bought a four-room HDB flat last year. Her main concern is also about the rising cost of living.

She said: "If my income doesn't rise as fast as taxes and inflation, I wonder if I'll be able to live comfortably.

"Things like the Assurance Package and GST Voucher scheme may help in the immediate future but in the long run, costs are still going to rise."

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Ms Angela Kho, 43, an assistant manager working in the eldercare sector, said the GST hike being spread out in two stages will help pace the effect on consumers.

The GST Voucher U-Save rebates will also come in handy, said Ms Kho, who is living in a four-room HDB flat with her husband and three of her four children. “With five of us, we sleep in separate rooms and use the air-conditioner at night... Water usage is also higher... and sometimes, my eldest daughter and her two daughters stay over, contributing to our costs,” she said.

Retirees Chang Yoke Poon, 65, and his wife, 63, also said help like the Community Development Council (CDC) vouchers and the additional GST Voucher payouts for seniors can help to reduce daily expenses, like food costs, which have been rising.

Mr Chang, who lives in a condominium, said his household monthly expenses is about $2,000, about $200 more than what it was about two years back. The couple have one daughter, who is married.

He added: "We can already start to see our expenses creeping up, even though we have taken steps to reduce spending. We don't eat out as frequently now.

"It's good that we have some help from the Government to adjust and lessen the blow. But GST is for life, hopefully the impact won't be too hard on our savings."

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Other consumers are weighing their options on purchasing big-ticket items.

Lecturer Magesh Anand, 47, said she is now seriously considering getting an electric vehicle (EV) when it is time to replace her car.

"The rebates on taxes for EVs will disincentivise people to buy full petrol cars, and I feel that the disparity will start becoming wider and wider," she said.

"The outlay (of purchasing an EV) is high in the beginning, but the savings are greater down the line... however, the infrastructure needs to catch up, and there needs to be more charging stations," she added.

Accountant Jonathan Phay, 36, said: "I think we should be accelerating our big-ticket purchases before the hikes are set in place."

He is looking to do just that. Mr Phay, who is single, bought a four-room flat earlier this year and said he is targeting to buy his furniture and appliances for the new place and get the renovation done before the hike.

Business owner Patrick Sng, who is in his 50s and lives in a four-room HDB flat with his wife, said he is not going to put off big-ticket items like travel.

"However, as a household, we can already see the cost of living inching up everywhere, whether it is in transport, food, or even hiring domestic help... I think being frugal helps," he added.

Experts say that while the offset packages will help, concerns about higher costs will remain salient down the line.

National University of Singapore professor in strategy and policy Lawrence Loh said the two-step GST hike was a "happy surprise".

"Most people were expecting a big bang (of a one-shot GST hike) possibly in July this year, but (the staggered GST) allows consumers to adjust their consumption habits and make plans," he said.

He added that the programmes to offset the GST increase with various payouts and vouchers were broad-ranging, covering several areas of spending.

However, the impact of these grants remains to be seen.

"We need to see how these grants will affect the various income groups down the line... the GST will affect income groups from all segments, but the lower- and middle-income groups will likely feel the pinch still," Professor Loh added.

  • Additional reporting by Goh Yan Han

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