On 8 September 2014, the Goods and Services Tax (Amendment) Bill 2014 (the “Bill”) was introduced in Parliament for first reading. The Bill seeks to amend the Goods and Services Tax Act (the “Act”) to implement changes arising from a periodic review of the goods and services tax (“GST”) system and administration.
The following are the key changes to be made by the Bill:
- Provide for non-legal entities to claim and account for GST on goods and intellectual property rights (“IPR”): The Act will be amended to provide for the situation where any goods, IPR or licence to use any IPR is held by a bare trustee of a non-legal entity (“NLE”). Under the Bill, an NLE refers to a partnership, limited partnership, club, association or society. Currently, such NLEs are unable to claim input tax on supplies made to the bare trustee. To place NLEs on par with legal entities with regard to supplies relating to goods, IPR and licences to use IPR, supplies of the same made to and supplies relating to the same made by the bare trustee on behalf of such NLEs, are deemed to be made to and made by, the NLEs respectively. Consequently, such NLEs will be able to claim input tax and will be required to charge output tax vis-à-vis the deemed supplies. Such supplies by the bare trustee will also be relevant in determining the eligibility and liability of the NLEs for registration under the Act.
- Allow GST-registered persons to fully claim GST on re-import of goods belonging to their customers: To facilitate outsourcing arrangements, GST-registered contractors who send their customers’ goods overseas for value-adding services by an overseas sub-contractor will be able to fully claim the GST incurred on re-import of such goods, instead of only the portion of import GST pertaining to the value-added component. To implement this, the Act will be amended to empower the Minister for Finance to make regulations providing for the claiming of input tax by a taxable person on the amount of GST paid on the re-importation of goods that were previously exported by the taxable person for value-added processes to be performed on the goods.
- Clarify the scope of GST zero-rating in relation to goods for use or installation on ships: This is a technical change to clarify that the GST zero-rating provision applies only to the sale or rental of goods that are used or installed on ships, and not to services such as procurement or logistics services relating to these goods.
Response to feedback from public consultation
The introduction of the Bill follows a public consultation by the Ministry of Finance (the “MOF”) from 11 June 2014 to 1 July 2014 on a draft version of the Bill. On 27 August 2014, the MOF released its response to the feedback received from the public consultation.
- Goods and Services Tax (Amendment) Bill 2014
- MOF press release
- Summary of key suggestions received and MOF’s responses
An article about the MOF public consultation was featured in a previous issue of the Allen & Gledhill Financial Services Bulletin (June 2014). To read the article entitled “MOF conducts public consultation on proposed changes to Goods and Services Tax Act: Changes to existing tax policies and administration”, please click here.