GOODS AND SERVICES TAX (AMENDMENT) BILL

Order for Second Reading read. 2.00 pm

The Parliamentary Secretary to the Minister for Finance (Mr Koo Tsai Kee): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, the GST (Amendment) Bill 1996 seeks to amend the GST Act:

(a) to provide for zero-rating of international telecommunication services;

(b) to allow refunds of input tax to local agents of overseas clients;

(c) to tighten provisions for the Tourist Refund Scheme;

(d) to forfeit goods involved in fraud;

(e) to provide for the recovery of GST due from joint-interests; and

(f) other technical amendments to facilitate the administration of the Act.

Zero-rating of international telecommunication services

The GST Act lists a number of international services which have been zero-rated in order to maintain our local companies' competitiveness vis-a-vis their overseas competitors. International telecommunication services will be added to this list. Besides the fact that the services provided are international in nature, the international communication market is also very competitive. As such, the 3% GST would cause competitive disadvantage to our local service providers. This would erode Singapore's efforts to build itself up as a telecommunications centre. Pending this amendment, remission of GST has been given to our local service providers under section 89(2) which empowers the Minister to remit GST. Clause 4 amends section 21 of the Act to effect this.

Refunds of input tax to local agents of overseas clients.

Under the existing GST Act, local agents who import and re-export on their overseas clients' behalf are unable to claim back the GST paid at the point of import because of certain technicalities in the Act. The GST Act will be amended to allow for the refund of GST paid to the local agents since the goods concerned are actually re-exported. This should remove the competitive disadvantage in the form of irrecoverable import GST faced by the local agents as compared to their overseas counterparts. Pending this amendment, remission of GST has been given to the local agents under section 89(2). Clause 7 inserts a new section 33A to effect this change.

Tourist Refund Scheme

In the first tourist refund fraud case committed in April 1994, the Customs and Excise Department was unable to take action against the persons involved because the details and conditions of the Tourist Refund Scheme were not specified either in the GST Act or the Regulations. Goods for which a tourist refund had been claimed were found in Singapore, but it was difficult to prove that they were not meant to be exported subsequently. To tighten the Tourist Refund Scheme provisions, the Act will be amended to prohibit the handling of such goods under prescribed circumstances. Clause 6 amends section 25 of the Act to effect this. Forfeiture of goods involved in fraud

Sir, the UK Value Added Tax Act and the UK Customs and Excise Management Act provide for the power of forfeiture of zero-rated exported goods found in the UK and goods in respect of which tourist refund had been claimed but were not brought out of the country. The GST Act will be amended to similarly provide for the power of forfeiture of such goods. This will serve as a further deterrence for the offence. Clause 14 inserts new sections 83A to 83D to provide for the forfeiture of goods involved in fraud.

Recovery of GST due from joint-interests

The GST Act currently allows the recovery of tax arrears from a debtor's bank account or other properties through an appointed agent, such as a bank. However, it is still possible for debtors to get away by putting their money in joint accounts. The GST Act will be amended to allow for the recovery of GST due from joint-interests, with the presumption of equal shares for the joint holders unless proven otherwise. This provision is similar to that provided for in the Income Tax Act. Clause 13 amends section 79 of the Act to effect this change.

Technical Amendments

Sir, the following technical amendments will also be made:

(a) to specify that money held by an appointed agent on the day or within 90 days of receiving a notice of appointment as an agent from the Comptroller can be used to pay the outstanding GST. The 90-day time frame is currently not specified. Clause 13 of the Bill makes this effective;

(b) to amend the definition of "taxable persons" to make it clear that a registered person who makes out-of-scope supplies can recover input tax. Clause 3 makes this effective;

(c) to amend the electronic data interchange (EDI) provisions to be consistent with the latest EDI provisions in the Customs Act since both sets of provisions refer to the TradeNet system. Clauses 2, 8 and 15 make this effective;

(d) to allow for the remission of GST on the local supply of services, in addition to importation and local supply of goods, with regard to international agreements or arrangements. Pending this amendment, the remission of GST on local supply of services to organisations like the diplomatic missions is currently being done under section 89(2). Clause 5 of this Bill makes the amendment.

(e) other minor technical amendments to simplify or clarify the provisions of the Act, and to remove the anomalies. These are effected in clauses 2, 9, 10, 11, 16 and 17.

Sir, a consequential amendment will also be made to section 13 of the State Immunity Act (Chapter 313) via clause 18 to provide for foreign states to be subject to provisions relating to their liability for GST. Such an amendment will remove any doubt as to whether GST is payable by the investment and trading arms of foreign governments and state trading corporations.

Sir, I beg to move.

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. -- [Mr Koo Tsai Kee].

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