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Budget 2019: Returning home from holiday? You may have to pay more GST, buy less duty-free liquor

SINGAPORE — Those travelling abroad may have to pay more Goods and Services Tax (GST) for their purchases overseas on their return, and they will enjoy duty-free concession on a lower amount of liquor products, Finance Minister Heng Swee Keat announced in his Budget speech on Monday (Feb 18).

From Feb 19, travellers who spend less than 48 hours outside Singapore will get a GST relief on the first S$100 worth of goods, instead of S$150 previously.

From Feb 19, travellers who spend less than 48 hours outside Singapore will get a GST relief on the first S$100 worth of goods, instead of S$150 previously.

SINGAPORE — Those travelling abroad may have to pay more Goods and Services Tax (GST) for their purchases overseas on their return, and they will enjoy duty-free concession on a lower amount of liquor products, Finance Minister Heng Swee Keat announced in his Budget speech on Monday (Feb 18).

He added that the Government is reviewing its tax system to ensure that it remains “resilient” amid rising international travel.

From Tuesday, travellers who spend less than 48 hours outside Singapore will get a GST relief on the first S$100 worth of goods purchased overseas, instead of S$150 previously.

Those who spend 48 hours or more outside Singapore will get a GST relief on S$500 worth of goods, instead of S$600 previously.

For example, from Feb 19, if a traveller has been away from Singapore for a week and purchased S$500 worth of goods, he would not need to pay GST, thanks to the tax relief of up to S$500 in purchases. However, if he buys S$800 worth of goods on that week-long trip, he would have to pay GST on the excess S$300.

The relief is applicable to Singaporeans, Singapore permanent residents and tourists, but not applicable for crew members and holders of a work permit, employment pass, student’s pass, dependant pass or long-term pass.

There have been cases of GST evasion in previous years.

In January 2018, a 25-year-old Singaporean woman was arrested at Changi Airport for failing to declare S$11,000 worth of luxury goods she had purchased overseas which were liable for GST.

Tax experts TODAY spoke to said that the changes may not have a material impact in boosting the government’s coffers.

They pointed to several reasons: the fact that the changes is targeted only at a specific group, the small adjustment to the relief quantum as well as the long-standing issue of enforcement.

EY’s Indirect Tax Services Leader Yeo Kai Eng said that the announcement by Mr Heng seems to send two messages: To remind travellers to declare purchases, and two, to raise the possibility that authorities may step up enforcement action.

Mr Kor Bing Keong, GST leader of PwC Singapore agreed, adding: “The quantum (additional GST revenue) won’t increase a lot unless active policing is involved.”

Mr Heng also announced that from April 1, travellers will be allowed to buy only two litres of duty-free liquor products, down from the current three litres.

Currently, travellers have three litres of duty-free allowance that can be used to buy either spirits, wine or beer.

The maximum duty-free allowance for spirits remains at one litre.

The last time the Government tweaked the duty-free allowance was in 2010, when it allowed travellers to purchase an additional litre of duty-free wine or beer in lieu of one litre of duty-free spirits.

CHANGES ON DUTY-FREE CONCESSION:

Currently, travellers have three litres of duty-free allowance that can be used in the following ways:

  • Option 1: 1 litre of spirit, 1 litre of wine, 1 litre of beer

  • Option 2: 2 litres of wine, 1 litre of beer

  • Option 3: 1 litre of wine, 2 litres of beer

From April 1, travellers will have these options:

  • Option 1: 1 litre of spirit, 1 litre of wine

  • Option 2: 1 litre of spirit, 1 litre of beer

  • Option 3: 1 litre of wine, 1 litre of beer

  • Option 4: 2 litres of wine

  • Option 5: 2 litres of beer

The conditions for purchasing duty-free liquor products will remain. The traveller must be above 18 years old and must have spent 48 hours or more outside Singapore before arrival.

He or she must also not be arriving from Malaysia. The liquor product bought must be for the traveller’s own consumption and must be allowed for import to Singapore.

WHY IS THE GOVERNMENT REDUCING THE DUTY-FREE ALLOWANCE?

The move to reduce the amount of duty-free concessions is to ensure that the tax system is progressive, resilient and sustainable.

“A fairer and more robust approach is (needed) to meet recurrent spending with recurrent revenues. Hence, we must continually review our tax system to ensure its resilience,” said Mr Heng.

Mr Heng said that recurrent spending needs are in areas such as healthcare and pre-school education and security.

These are "necessary expenditures" that must not be funded through borrowing, as borrowing "shifts the burden of paying for today's needs onto future generations". This is why the Republic needs to review its tax systems to ensure recurrent revenues are sustainable.

Concession sales at major travel hubs in Singapore are increasing.

In 2017, concession sales at Changi Airport grew 7.6 per cent from the year before to S$2.5 billion, setting a new record, according to Changi Airport Group.

Travellers from China, Singapore, Indonesia, India and United Kingdom were the biggest spenders at Changi Airport, with Chinese and Singaporean shoppers accounting for more than half of the total sales.

Liquor and tobacco were among the most popular product categories, along with perfumes and cosmetics.

WHAT IS GST-IMPORT RELIEF?

All goods brought into Singapore (other than exempt imports) are subject to GST at the prevailing rate of 7 per cent on the value of goods, which includes the cost, insurance and freight (CIF) plus other chargeable costs and the duty payable (if applicable).

But travellers are given GST relief on new articles, souvenirs, gifts and food that they bring into Singapore for personal use and consumption. 

"The GST import relief seeks to balance between collecting GST revenue and facilitating customs clearance at the borders," the Inland Revenue Authority of Singapore (Iras) and Singapore Customs said in a joint statement on Monday following Mr Heng's announcement.

For goods that consumers import by parcel post, the GST relief for amounts up to S$400 per shipment remains. However, unlike goods purchased while overseas, if the value exceeds S$400, there is no GST relief, and GST is payable on the total value of the shipment.

WHY DO I PAY GST ON THINGS BOUGHT OVERSEAS?

This is because GST is a tax on the taxable supply of goods and services in Singapore and on the importation of goods into Singapore (other than an exempt import). That means that GST is levied on goods brought into Singapore or purchased locally. GST has been in force in Singapore since 1994.

For goods imported for their own personal use, travellers are required to pay GST on the value of the goods which is in excess of the GST relief granted to them.

"They are advised to keep and produce the invoices or receipts of their purchases for computation and verification of the tax payable," said Iras and Singapore Customs, adding that it is the responsibility of travellers to make an accurate and complete declaration of the dutiable and taxable items in their possession. 

WHAT ARE THE PENALTIES FOR NON-COMPLIANCE?

Failure to declare purchases subjected to GST or making an incorrect declaration constitutes an offence under the Customs Act and the GST Act.

Those convicted can be fined up to S$10,000 or the equivalent of the amount of tax payable, whichever is greater, and/or face imprisonment for up to 12 months.

Any person found guilty of fraudulent evasion of GST will be liable to a fine up to 20 times the amount of tax evaded and/or imprisonment for up to two years.

With additional reporting by Janice Lim.

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