Low-value goods bought online and imported by air or post will be subject to the goods and services tax (GST) from Jan 1, 2023.
Even non-digital services that are imported for consumers, such as those involving live interactions with overseas providers of fitness training, counselling and tele-medicine, will attract GST.
This will help level the playing field for local businesses to compete effectively, said Deputy Prime Minister Heng Swee Keat.
Low-value goods that are worth $400 or less, and imported via air or post, are currently not subject to GST to facilitate clearance at the border, but the tax is paid on such goods bought here.
All goods imported via land or sea are already taxed, regardless of value.
DPM Heng said yesterday: "One aspect of a fair and resilient tax system is ensuring a level playing field for our local businesses vis-a-vis their overseas counterparts. This is especially relevant as e-commerce for sales of goods and services is growing."
He noted that other jurisdictions have already implemented or announced plans to impose the equivalent of GST on such goods.
"Overseas suppliers of goods and services will be subject to the same GST treatment as local suppliers," he added.
This new taxation will be effected through the Overseas Vendor Registration regime, which requires overseas suppliers and electronic marketplace operators that make significant sales of digital services to local consumers to register for GST.
These registered suppliers and operators will then charge GST on their sales of low-value goods that are delivered over air or post to local consumers.
Shoppers will have to pay the GST when they buy from these overseas suppliers, just as they will be charged when they buy such items from local businesses.
Meanwhile, local GST-registered businesses here will have to self-account for GST when they import such goods as well and pay the tax.
GST was extended to cover all imported digital services in Budget 2018, and kicked off from Jan 1 last year. These include video and music streaming services, apps, software and online subscription fees.
Online sales made up 11 per cent of Singapore's total retail takings in December last year.
A spokesman for e-commerce platform Lazada said: "Lazada supports the Government's commitment to build a trusted e-commerce economy that protects the interests of consumers and businesses.
"We will comply with local tax regulations and collaborate with legislators on digital tax initiatives that equitably benefit all relevant stakeholders, including the small and medium-sized enterprises that sell on our platform."
Consumers and experts said this tax will not stop the online shopping trend, but will create a more level playing field for local and overseas sellers.
EY Asean indirect tax leader Yeo Kai Eng said: "GST will be an additional cost for online shoppers, but online shopping is also convenient and the prices can still be very attractive. It will not deter them."
Mr Lam Kok Shang, head of indirect tax at KPMG in Singapore, added: "With more businesses now gravitating away from selling via bricks-and-mortar means and moving onto online platforms or marketplaces, the imposition of GST on low-value goods places overseas sellers of goods and local businesses on a level playing field."
Ms Esther Yeoh, 25, a teacher, said: "There are companies in Singapore that try to produce those same goods or sell them, so it is a good thing to support local businesses and make it a habit."
