Speech by Mr. Louis Ng Kok Kwang, MP for Nee Soon GRC, at the Second Reading of the Goods and Services Tax (Amendment) Bill (Bill No. 31/2021)
Mdm, this Bill will update our GST regime.
Significantly, this Bill will extend GST to imported low-value goods. This ensures a level playing field for local suppliers and overseas suppliers.
Additionally, the Bill will also update the GST treatment for media sales to more closely reflect the reality of how services are advertised and consumed.
I thank the Ministry of Finance for consistently consulting the public on its Bills, including this Bill. I also commend the Ministry’s diligence in always providing summaries and its responses to key feedback received in its consultations.
I have two points of clarification to make on this bill.
GST treatment for supply of media sales
My first point is on the GST treatment for the supply of media sales.
The amendments to section 21 mean that the GST treatment for supplies of media sales depends on where the customer and the direct beneficiary of the service belongs, rather than where the advertisement is circulated.
IRAS’s e-Tax Guide has provided some guidance on how to identify the “direct beneficiary” of media sales.
In particular, the e-Tax Guide provides that the contractual client will generally be regarded as the sole direct beneficiary where two conditions are satisfied.
First, the service agreement does not require the services to be provided to another person.
Second, the supplier liaises only with the contractual client and is accountable only to the contractual client.
Can Minister clarify if both conditions must be satisfied in order for the contractual client to be deemed the sole direct beneficiary? Or is it sufficient that either one of the conditions is satisfied?
The e-Tax Guide also provides that when the two conditions are satisfied, the supplier does not need to look beyond the contractual client in determining the correct GST treatment.
In the event that the two conditions are not satisfied, can Minister share what other factors a supplier should take into account to determine who the “direct beneficiary” of the service is?
In particular, where multiple layers of contracts exist between a service provider and the beneficiary of a service, where should a supplier draw the line in determining its “direct beneficiary”?
Best available information
My second point is on the use of the best available information to determine whether goods are distantly taxable.
The new section 14(1B) provides that a recipient may rely on the best available information to determine whether goods are distantly taxable if the recipient is unable to verify the location of the goods at the point of sale of the goods, or how the goods will be transported to a place in the customs territory.
In the public consultation conducted on the Bill, MOF had declined to accept a suggestion that the Bill prescribe information that businesses should rely on to determine if a supply of goods is distantly taxable goods that fall within the scope of GST.
MOF declined to prescribe the information to reduce compliance burden and has stated that IRAS will provide examples in its e-Tax Guide.
While the examples will be useful, what will also be important in the event of a dispute is which party bears the burden of proof.
Can Minister elaborate where the burden of proof lies and how the burden shifts in determining whether there was compliance with the tax treatment of distantly taxable goods?
For instance, does the burden of proof shift to the Comptroller of Income Tax once the recipient is able to show a preliminary case that they relied on the best available information?
Is the burden then on the Comptroller to show that the recipient in fact had access to and should have relied on other information?
This clarification is important because the term “best available information” is so general that it may pose enforcement issues.
Notwithstanding these clarifications, I stand in support of the Bill.
Watch the speech here.