GOODS AND SERVICES TAX (AMENDMENT) BILL

GOODS AND SERVICES TAX (AMENDMENT) BILL: Order for Second Reading read.

The Second Minister for Finance (Mrs Lim Hwee Hua): Mdm Deputy Speaker, I beg to move, "That the Bill be now read a Second time".

The Goods and Services Tax (Amendment) Bill 2010, or the GST Bill for short, comprises nine amendments. The first three amendments give legislative effect to the GST initiatives announced in the 2010 Budget Statement, while the other six amendments have arisen from our ongoing review of the GST system.

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The draft Bill was released for public consultation in June 2010 and has been revised to incorporate feedback from the public.

Budget 2010 GST changes

Madam, let me first touch on the provisions in the Bill that give legislative effect to the GST changes announced in the 2010 Budget Statement, which collectively serve to reduce compliance costs for businesses.

Simplification of GST accounting rules

First, with the amendment, businesses only need to account for GST upon the issuance of invoice or receipt of payment, whichever is earlier, and will no longer need to track the delivery of goods and services for most transactions. This simplifies GST accounting for businesses. Clause 3 of the Bill provides for this change. Clauses 11, 12 and 13(a) and (b) of the Bill are consequential amendments.

Zero-rating for marine and aerospace industry

Second, to simplify GST compliance for businesses supporting the marine industry, GST zero-rating is extended to:

Firstly, pleasure and recreational ships wholly used for international travel;

Secondly, goods supplied for use, installation or for retail sale on all ships qualifying for the zero-rating treatment; and

Thirdly, transportation of goods or passengers via a ship to or from international waters even if the ship does not call on a port outside Singapore (for example, cruise-to-nowhere packages).

In tandem with the new zero-rating treatment for the marine industry, GST zero-rating is also extended to stores and

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fuel supplied to and merchandises for retail sale on an aircraft qualifying for zero-rating treatment. Clause 6 of the Bill provides for these GST changes.

Import GST Deferment Scheme

Third, the Government will introduce a new scheme to allow approved businesses to defer import GST, currently payable on their goods at the point of entry into Singapore, to the point of submission of their GST returns. Approved businesses will in effect enjoy a credit period on their import GST of up to two months, similar to what businesses can enjoy for their local purchases. The scheme will be open to GST-registered businesses with a good track record and operating on the monthly reporting system. Clause 7 of the Bill provides for this initiative. Clauses 5, 13(c), 15 and 16 of the Bill are consequential amendments.

Non-Budget 2010 GST changes

Let me now move on to the non-Budget 2010 GST changes. As I mentioned earlier, the remaining six amendments to the GST Act have arisen from our ongoing review of GST policies and administration. Let me highlight three of these amendments for the benefit of Members.

Approved Contract Manufacturer and Trader scheme

The first change concerns the Approved Contract Manufacturer and Trader (ACMT) scheme which enhances the international competitiveness of qualifying businesses by allowing them to disregard GST on value-added services performed for their overseas clients even if the goods are treated or processed in Singapore.

Refinements have been made to the scheme to allow approved businesses to self-assess the eligibility of their

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transactions under the scheme instead of having to seek approval from the Inland Revenue Authority of Singapore (IRAS). To support the refinements, the legislative amendments allow the Minister to make regulations to:

Firstly, empower the Comptroller of GST to publish the names of approved businesses and impose penalties should goods imported under the scheme be delivered by these businesses to non-approved persons; and

Secondly, require approved businesses to account for GST on behalf of the overseas principal when the finished goods are delivered to the customers of the overseas principal.

Clause 10 of the Bill reflects these changes.

Widening scope of electronic services

The second change relates to electronic services. Currently, the GST Act allows the Comptroller of GST to provide electronic services only for the filing or submission of any return, declaration or document. The Act will be amended to broaden the scope of electronic services that can be provided by the Comptroller of GST. This enhancement is provided under clause 14 of the Bill.

Exemption of residential properties

The third change pertains to the exemption of residential property. Currently, the GST Act provides that properties approved exclusively for residential purposes under the Planning Act are exempt from GST. While this allows for GST exemption for most residential properties, it may not be clear if the same treatment can be applied to other places of residence such as homes

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for the aged, workers’ dormitories and students’ hostels. The GST Act will thus be amended to clarify that the policy intent is to exempt from GST these properties that are used principally as a place of residence. The GST Act will also be amended to empower the Minister to gazette an Order on the list of residential properties that can qualify for GST exemption. Clauses 17 and 18 of the Bill provide for this change.

Madam, I beg to move.

Question proposed.

4.06 pm

Mr Teo Siong Seng (Nominated Member): (In Mandarin) : [For vernacular speech, please refer to Appendix A.] Mdm Deputy Speaker, first, I would like to declare my interest as a board member of the Maritime and Port Authority of Singapore, President of the Singapore Shipping Association and the Managing Director of Pacific International Lines Private Limited.

Today, I would like to talk about what the marine industry expects from the Bill.

The maritime industry is a very important sector for Singapore, accounting for 7% of the country’s GDP and employing over 150,000 people. Singapore has already achieved the status of becoming an international maritime centre for Asia and the world.

Prior to this Amendment Bill, the zero-rating for qualifying ships included most commercial ships (including oil rigs). Ships for recreational or pleasure use, including those licensed under the Maritime and Port Authority of Singapore (MPA), were excluded.

After the amendment, the definition of "qualifying ship" will now be widened to include ships for pleasure and recreational

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use. Zero-rating relief has also been granted to ships sailing between Singapore and international waters and it would no longer be necessary for them to call on a foreign port outside Singapore to qualify for zero-rating. "Cruise to nowhere" is one such example. Usually it will depart Singapore and sail to international waters for a few days and return to Singapore without calling on any foreign port. Some leisure crafts are doing the same, returning to Singapore without calling on foreign ports.

The marine industry welcomes these changes. However, even though the qualifying scope is widened, there is still a need to maintain the relevant export documents such as delivery orders and these must be certified by the Ship Master or Chief Engineer that goods and equipment on the ship are intended for export. Quite often, as the ship's duration in the port is short, the Ship Master or the Chief Engineer is too busy to get the documentation done on time. Therefore, documents are not ready by the time the ship leaves the port, and both the supplier and the customer have to track closely the documents thereafter.

Ideally, we should work towards having a similar treatment enjoyed by the aerospace industry, where there is a standard list of qualifying components. When purchasing such components, no signatures are required from the Ship Master or Chief Engineer. This would streamline the whole documentation process.

Hence, I recommend that IRAS forms a working committee comprising the Association of Singapore Marine Industries (ASMI), Singapore Shipping Association (SSA), Singapore Association of Ship Suppliers (SASS) and other relevant stakeholders from the maritime industry to study the feasibility and benefit of identifying a list of ship parts that are unique to the industry. This list can then

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be used as a reference for the purpose of identifying "qualifying ship parts". This will not only save human resources and GST compliance cost, increase the productivity of the marine sector, but also facilitate the business development of the marine suppliers and improve Singapore’s image of being an international cruise centre.

I believe that greater relief can be provided in this respect so as to enhance Singapore's status as a maritime hub and further underscore the Government’s pro-business policy.

In conclusion, I support the amendment to the Bill.

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Mrs Lim Hwee Hua: Madam, let me first thank Mr Teo Siong Seng for his support for the changes which will be extremely helpful to the marine sector.

Mr Teo has suggested that the Ministry consider extending the same relief granted to the qualifying aircraft parts to the marine or the shipping equivalent and that doing so would further enhance Singapore as an international maritime centre.

Before I go on to respond to Mr Teo, perhaps I could just explain to Members the incentive that we incorporated in Budget 2009 for the aircraft industry. In Budget 2009 we had extended GST zero-rating to any local sale and repair of aircraft parts and components if they are for use on an aircraft deployed wholly for international travel. With this zero-rating, the aircraft parts and components need not be immediately exported after the sale or repair. And also businesses need not keep track of export documents, thus easing compliance for the aerospace industry.

I wish to assure Mr Teo that, indeed, the Inland Revenue Authority of Singapore

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(IRAS) is keen to see if such a similar treatment can be extended to the shipping industry. In fact, IRAS has been studying the implementation issues in detail. In its earlier review, IRAS has noted that unlike the aerospace industry, unfortunately, the marine sector does not have an internationally recognised certification process for ship parts and components deemed exclusively for use by ships in international travel. Because of this lack of international certification, it makes it very difficult for IRAS to verify if there is a specific class of ship parts or components that can be zero-rated upfront in the absence of the relevant export documents.

As I understand, certain ship parts and components may also have alternative uses. For example, a ship engine may also be used in power plants, leading to potential revenue leakages if we do not have certainty. Nonetheless, IRAS remains keen to review the extent to which GST zero-rating can cover ship parts and components while minimising the need for supporting export documents and for the review, IRAS will be very happy to work with the relevant players in the marine sector, including the associations suggested by Mr Teo, to develop a workable solution for the industry.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mrs Lim Hwee Hua].

Bill considered in Committee; reported without amendment; read a Third time and passed.