GOODS AND SERVICES TAX

GOODS AND SERVICES TAX:

(Change of schedule on payment and refund): 12.

Ms Jessica Tan Soon Neo asked the Prime Minister and Minister for Finance whether he will consider changing the schedule on the payment, including the issue of late payment penalty, and refund of GST for businesses, to help small and medium enterprises manage the impact on their cashflow.

The Minister of State for Finance (Mrs Lim Hwee Hua) (for the Prime Minister and: Column: 1379

Minister for Finance): Sir, first, let me assure the House that the existing schedules for GST payments are not unreasonable. Businesses only need to make payment of GST to IRAS after deducting the relevant input GST incurred from the output GST collected by them. They have one month from the end of their prescribed accounting period to do so. In fact, businesses that pay via GIRO have up to 45 days to pay the net output GST that they have collected on behalf of IRAS.

Businesses can choose their prescribed accounting period to be either quarterly or monthly. Most businesses choose a quarterly accounting period. This means that they would effectively enjoy a net cash float from the output GST collected during the quarter. As GST is actually money collected by the businesses on behalf of the Government, there is no reason to extend the one-month period to allow businesses to keep GST money for a longer period. For the same reason, a late payment penalty is necessary to enforce prompt payment.

For GST refunds sought by businesses from IRAS, so far, 90% have been processed within eight days and 95% within 30 days. The 5% of cases that require a longer processing time are those where the claims have to be verified before the refunds can be made. Nonetheless, IRAS will continue to seek improvements in its current service standards. Alternatively, if businesses want to receive refunds more regularly, they can opt for a more frequent accounting period of one month, instead of the quarterly accounting period of three months. The faster turnaround under the monthly GST filings should also help with businesses’ cash flow.

Mr Siew Kum Hong: Mr Speaker, Sir, it is expected that the GST rate will be

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increased and I think we will find out just how much in a couple of hours.

Mr Speaker: Do not pre-empt, Mr Siew.

Mr Siew Kum Hong: This will result in many more enterprises registering for GST, and they will be unfamiliar with the system. However, IRAS has announced that they will charge for tax rulings on GST. So I have two supplementary questions for the Minister of State. Firstly, what is the rationale for imposing such a charge, especially at this time? And, secondly, would IRAS consider a grace period for newly-registered enterprises where it will not charge for tax rulings? So it would be a sort of amnesty period.

Mrs Lim Hwee Hua: Sir, as for levying a charge for advance ruling, this is, in a way, to counter the cost savings that companies would realise by having the advantage of an advance ruling. As regards the special arrangement that might come about from helping businesses to register for GST compliance, I shall leave the Member to await the Minister's statement afterwards.

Ms Lee Bee Wah: Mr Speaker, Sir, I would like to ask the Minister of State, for the service industry, correct me if I am wrong, once it is invoiced, we send an invoice out, we have to pay the GST regardless of whether we collect the payment or not. If this is true, would the Ministry consider "pay when paid"?

Mrs Lim Hwee Hua: Sir, allow me to put the situation in context. Currently, most GST-registered persons do not have difficulties in paying GST to IRAS. In 2006, 93.4% of GST-registered persons actually paid GST on time. The amount that is actually not paid on time is only about 5% of the GST collection. Having said that, for businesses that have special circumstances or experience genuine

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financial hardship, IRAS would certainly help them tide over the financial difficulty by granting monthly instalments with the late payment penalties.