GST on Digital Services: What it Means for You.

With most attention on Budget 2018 focused on the impending rise of GST from 7%-9%, Singaporeans might have missed some of the more subtle changes directly affecting them.

Singapore Budget 2018 on 19 Feb.

Finance Minister Heng Swee Keat also announced that GST would be imposed on digital services – both imported and local – come 2020.

This includes (but is not limited to):
– Subscription fees on music and movie streaming services such as Spotify and Netflix
– Paid-mobile apps as well as in-app purchases.
– Listings on electronic marketplaces such as Carousell

Streaming services such as Spotify will be liable for GST

These digital services are classified under business-to-consumer services (B2C).

B2C services will be eligible for GST if they fulfill two criteria:
1)Global turnover is over $1 million
2)Wholesale of digital services to customers is over $100,000.

Digital business-to-business services (B2B) will also be liable under GST come 2020.

This includes marketing, accounting, and IT services outsourced by local companies to overseas service providers.

However (and fortunately), E-commerce on physical goods will still not be taxed so long as they are below $400.

Redmart
Online shopping from redmart, qoo10, Zalora, etc., will fortunately not be taxed.

At least, for now.

It is likely that an e-commerce tax has not yet been announced because of the difficulty in implementing and regulating it – amidst growth in second-hand shopping online as well as underground deep web markets.

MOF has stated that it is ‘reviewing international developments before deciding on the measure to take’.

So, in summary, for now:
– No changes in taxes for physical goods in online shopping
– From 2020, GST to be levied on online services such as subscriptions to Spotify or Netflix, and paid apps.

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