GOODS AND SERVICES TAX (AMENDMENT) BILL

Order for Second Reading read. 2.30 pm

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The Bill seeks to amend the Goods and Services Tax Act to give legislative effect to a new scheme announced in the FY99 Budget, the Approved Contract Manufacturer and Trader (ACMT) Scheme.

Rationale

I have announced the ACMT scheme in the 1999 Budget to address the GST burden faced by some contract manufacturers whose businesses are substantially with overseas clients. The increasing complexity of business transactions has caused GST problems for some contract manufacturers. Instead of exporting the finished goods to their overseas clients, contract manufacturers are increasingly also being asked by their overseas clients to deliver the finished goods to the overseas clients' customers in Singapore. This local delivery is considered a taxable supply under our GST law. In instances where the overseas clients who own the finished goods do not want to designate an agent in Singapore to account for the GST on their behalf, the contract manufacturers might end up having to bear the GST on local delivery and have no recourse to claim it back. This GST burden makes our contract manufacturers less competitive internationally.

Under the ACMT scheme, the local delivery of the finished goods by the approved person to the customers of the overseas clients and the fees for the value-added activities on the goods will be deemed to be outside the scope of GST and GST will not be chargeable. Instead, the overseas client's local customers who purchase and receive the goods in Singapore will account for GST. The scheme is also made available to other traders who engage in value-added activities substantially for overseas clients and face the same GST problem as the contract manufacturers on their local deliveries.

Proposed Amendments

The Bill makes the following amendments to the Goods and Services Tax Act:

(a) Amendment of section 12(8) to allow regulations to be made with respect to the time of supply for the purposes of the recipient accounting for the output tax;

(b) Amendment of section 20(2) to allow the approved contract manufacturer or trader to be able to claim credit for input tax attributable to supplies made by him; and

(c) Introduction of a new section 37A relating to the ACMT scheme such that local supplies made by the approved contract manufacturer or trader on behalf of an overseas client shall be free of GST and the recipient of the goods would be required to account and pay GST for the goods as if he had himself supplied them. The new section 37A also enables the Minister to make regulations relating to the implementation details of the scheme.

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. - [Dr Richard Hu Tsu Tau].

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