Singapore’s GST is a broad-based consumption tax levied on import of goods, as well as nearly all supplies of goods and services. The only exemptions are for the sales and leases of residential properties and most financial services. Export of goods and international services are zero-rated.
The government argues that with an ageing population, Singapore’s income tax base is expected to decline. With a broad-based GST, the taxation burden will be more evenly spread among the population. Thus, the GST was introduced as part of a larger exercise to put in place a tax structure to see the country into the future.
A value-added tax, like the GST, also has several features that make it attractive. Being a tax on consumption, and not on income, the tax system inherently encourages savings and investments instead of consumption. The tax also has a self-policing mechanism that discourages evasion, unlike in a retail sales tax system or an income tax system where it would be relatively easier to evade.
The government also announced a GST offset package consisting of a set of comprehensive measures to help lower income groups. Citizens have to sign-up beginning 15 May 2007 in order to receive their GST Credits in their bank accounts.
Besides FairPrice, NTUC is also absorbing the 2% increase on NTUC Foodfare, NTUC Childcare, NTUC LearningHub, NTUC Club and NTUC Healthcare. These will also last for 6 months.