Budget 2021 Emerging stronger

GST on goods bought online may benefit local retailers: Panel

But questions remain over implementation as overseas vendors will need to be registered

(From left) Straits Times associate editor Ven Sreenivasan, UOB senior economist Alvin Liew and KPMG tax partner Harvey Koenig with moderator Michelle Martin at yesterday's panel discussion on the Budget. The live session was jointly hosted by The St
(From left) Straits Times associate editor Ven Sreenivasan, UOB senior economist Alvin Liew and KPMG tax partner Harvey Koenig with moderator Michelle Martin at yesterday's panel discussion on the Budget. The live session was jointly hosted by The Straits Times and Money FM 89.3.ST PHOTO: DESMOND FOO

The introduction of goods and services tax (GST) on low-value goods purchased online and imported by air or post will raise a lot more revenue for the Government, observers said yesterday, following the Budget speech by Deputy Prime Minister Heng Swee Keat.

However, how it will be implemented remains to be seen, as there are many factors to consider such as getting overseas players to register, noted the three-man panel discussing the Budget.

The live session jointly hosted by The Straits Times and Money FM 89.3 was moderated by the radio station's presenter Michelle Martin.

Mr Heng, who is also Coordinating Minister for Economic Policies and Finance Minister, had announced that from Jan 1, 2023, low-value goods bought online and imported by air or post will be subject to GST.

GST will also be extended to imported non-digital services for consumers, such as those involving live interactions with overseas providers of fitness training, counselling and telemedicine.

Mr Harvey Koenig, tax partner at KPMG, said that the pandemic has seen many more people going into the online domain to make purchases, instead of buying from bricks-and-mortar shops.

"So if you take a snapshot a year ago versus what we could see going forward, we could see there's a lot more (to be gained) through taxing all these low-value goods," he said.

However, questions remain over the implementation of this arrangement, as overseas vendors will have to be registered to account for GST.

Another question is whether it would be sufficient to make up for the deficit, or whether other additional sources of revenue will have to be explored by the Government.

Mr Heng had said in his speech that the Budget for financial year 2021 will have an expected deficit of $11 billion.

UOB senior economist Alvin Liew said the shift towards online purchases had already been happening, and the pandemic merely hastened the trend.

He said the implementation of GST on low-value goods bought online was "inevitable".

"If you look at retail sales, there's a growing chunk of it that is online," he said, noting that the GST implementation will also level the playing field for retailers who rely on their physical presence.

However, he said whether or not the move will actually help such retailers remains to be seen, as the online business landscape will only grow and expand further.

Mr Koenig questioned the target of the move: "Also when we talk about how this will be imposed on the sellers, would there be a level playing field on that front? Are you going to do this for the bigger players, or for the smaller players as well?"

ST associate editor Ven Sreenivasan noted that GST for online goods might make people reconsider buying things online, as it may raise overall costs considerably. "If you are going to buy a $400 item and pay $28 in GST, you may think twice as it suddenly becomes more expensive," he said.

He, too, felt it remains to be seen whether bricks-and-mortar shops will benefit from this move, and whether they could still go on to pivot and innovate to improve their businesses.

Mr Sreenivasan also said it was "ironic" that while the Government was setting aside $133 million in the Covid-19 Driver Relief Fund, it was also raising petrol duties. It is "bittersweet" for those affected, he said.

Mr Liew said the raising of petrol duties was part of Singapore's wider push towards a cleaner society, in accordance with its Green Plan. Apart from taxi and private-hire drivers, he said businesses such as logistics companies will have their livelihoods impacted by the increase in the cost of resources needed in their line of work, but he noted that the grant might offset it to some degree.

A version of this article appeared in the print edition of The Straits Times on February 17, 2021, with the headline 'GST on goods bought online may benefit local retailers: Panel'. Subscribe