It’s Still Unknown How GST Can Be Implemented on Overseas Goods

By
Rae Woo
-

If you asked someone where their favourite place to shop from was, chances are their answers won’t be an actual retails store, but an online marketplace like Taobao and Shopee.

Online shopping’s become a way of life for us now—who doesn’t enjoy getting cheaper products from various countries delivered straight to your doorstep? You don’t even have to leave the comfort of your couch for it!

But alas, there’s no free lunch in this world, as the old saying goes.

Soon, those cheap prices are going to get even steeper, just like ERP rates and practically almost everything else, because the government wants in on the action too.

GST to Be Implemented On Goods Purchased Online

Darn, just as we thought we’d be able to avoid paying the GST if we only buy things from overseas.

This year’s Budget 2021 speech given by Deputy Prime Minister (DPM) Mr Heng Swee Keat on 16 Feb saw the announcement of a GST being tagged to low-value goods worth below $400 that are bought online and imported here by air or post. It will be made effective from 1 Jan 2023.

Non-digital consumer services involving live interactions with overseas fitness trainers, counselling, and tele-medicine will also face GST charges.

The Straits Times and Money FM 89.3 then held a panel following the Budget speech with experts, who believe that the move will raise “a lot more” revenue for the government.

Mr Harvey Koenig, tax partner at KPMG, attributed the shift of many to online shopping instead of buying from brick-and-mortar stores to the pandemic, since we are all in a very different situation from where we were last year.

Compared to last year, the trend is only expected to grow, leaving room for a lot more to be gained through taxing these low-value overseas goods.

However, it’s still vague over how they’re really going to implement such a tax, as it requires overseas vendors to be officially registered first before accounting for the GST.

DPM Heng also announced in the Budget speech that this year’s Budget will set the government back by a deficit of a whopping $11 billion, more than any of us can imagine.

The GST implementation may not be enough to cover this deficit, and it remains to be seen if the government will still have to look into other forms of revenue.

But What Will the Implementation Help in?

Such a move was “inevitable” since online purchases were gaining popularity all along, with the pandemic only hastening the trend, commented UOB senior economist Alvin Liew.

“If you look at retail sales, there’s a growing chunk of it that is online,” he added, noting that there was also a possibility that the GST implementation will “level the playing field” for retailers who depend on their physical stores.

It’s also unclear for the time being if these retailers will be helped, for the online business landscape will continue to grow and expand exponentially.

“Also, when we talk about how this will be imposed on the sellers, would there be a level playing field on that front? Are you going to do this for the bigger players, or for the smaller players as well?” questioned Mr Koenig regarding the motive of this implementation.

Overall costs will also increase, which may also make consumers reconsider purchasing goods from online, said ST Associate Editor Ven Sreenivasan.

Suddenly having to pay an extra $28 in tax when you were only prepared to pay for a $400 product will tend to turn anyone off, right?

He also agreed with the sentiment that brick-and-mortar stores may or may not benefit from such a move, and whether they will be able to improve their businesses through innovation is also another consideration.

11.11 sales are going to be really different now, huh?

For more information about the GST mentioned in the Budget 2021 speech, click here.

Feature Image: aslysun / Shutterstock.com

Watch this for a complete summary of what REALLY happened to Qoo10, and why it's like a K-drama:

Read Also:

Advertisements
 
Rae Woo
Email: [email protected]