Following Singapore's 2012 Budget announced on 17 February 2012, we highlight two of the key changes to the Goods and Services Tax ("GST") regime.

GST exemption for supply of investment-grade gold and precious metals

To support institutions with customers trading in physical gold or precious metals in Singapore, the import and supply of investment-grade gold[1] and precious metals[2] will be treated as exempt supplies for GST purposes. This aligns the GST treatment of investment-grade gold and precious metals with the GST treatment for shares and other financial instruments. Currently, non-GST registered buyers of gold will need to absorb the GST costs (at 7 percent), unless the supply can qualify for zero rating under the export rules. This discourages the set up of gold vaults outside of a zero GST warehouse.

This is a positive move as Singapore tries to build for itself a reputation as a trading hub for physical gold and precious metals. One of Singapore's strategic advantages is its convenient proximity to India and China, which have two of the world's largest consumer markets for gold. This change also puts Singapore on par with Hong Kong as a gold trading location (because Hong Kong does not impose any goods and services taxes or value-added taxes).

Subsequent measures will also be introduced to ease the cash flow and compliance burden of qualifying refiners and local consolidators of precious metals with regards to input GST incurred pursuant to the import and purchase of raw materials.

The above changes are effective from 1 October 2012 and the Inland Revenue Authority of Singapore (the "IRAS") will release further details by 1 September 2012. Further implementation details, including details on input tax claims, will also be finalised after consultation with the industry.

Extension of the GST temporary import period

The temporary import scheme generally allows goods to be imported for repairs and other prescribed purposes (e.g. stage performance, testing, experiments, demonstrations, exhibitions, fairs etc.) without the need for GST to be paid, if certain conditions are fulfilled. 

One of these conditions is that the imported goods are to be re-exported within three months from the date of importation (the "Temporary Import Period"). GST will be payable if the goods are re-exported after the expiry of the Temporary Import Period.

The Temporary Import Period of three months will be extended to six months with effect from 1 April 2012. The Singapore Customs via its circular dated 20 March 2012 informed that requests for any further extension will be assessed on a case by case basis and in any event such extension granted will be capped at three months.

This broadened scope of GST relief for temporarily imported goods will encourage foreign businesses to conduct repairs in Singapore, as well as import goods to Singapore for the other prescribed purposes as noted above.