Taxing the Digital Economy: Impending changes to GST in Singapore

Should digital downloads, streaming services and online purchases from foreign entities be subject to goods and services tax (GST) in Singapore? How about off-premise cloud computing?

The problem

Although the BEPS package is heavily focused on direct or income taxes, Action 1 of the final package (Addressing the Tax Challenges of the Digital Economy) notes that because the digital economy is increasingly becoming the economy itself, it would not be feasible to ring-fence the digital economy from the rest of the economy for tax purposes – and that includes indirect tax, or for Singapore’s purposes, GST.

Possible solutions

1. Remove or lower current import relief

One possible option, in relation to instance a) above in a cross-border supply of tangible goods, is clearly the reduction or removal of import relief. Examples of countries which have already moved or are moving towards the lowering or removal of import relief include Australia, Switzerland, and the European Union (EU).

2. Requiring overseas suppliers to register for GST

The removal or reduction in import relief provides a possible solution for cross-border supplies of goods, but how about digital or remote services such as those in instance b), which do not pass through any customs collection points and are contracted directly by the end consumer without the intervention of domestic intermediaries?

3. Activate the reverse charge mechanism

One other measure that Singapore could consider in addressing cross-border supplies of digital services in instance b) above, is activating the reverse charge mechanism under section 14 of the Goods and Services Act. The reverse charge mechanism works by allowing (or sometimes requiring) the customer to account for the tax on supplies received from foreign suppliers (i.e. customers self-account for GST). For obvious reasons, this is not practicable for Business-to-Customer (B2C) situations since private consumers are not required to register and account for GST.


It is unclear at this point, which direction the Government will choose in relation to this issue, but it is clear that the eventual solution(s) would have to strike a balance among multiple objectives, including the efficient collection of tax, minimisation of compliance burdens, promotion of local fair competition (but also free movement of goods and services), and the upholding of the destination principle.

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