1. GST treatment of cancellation fees charged by tour agencies in the context of tour bookings
The Inland Revenue Authority of Singapore ("IRAS") has issued updated guidance on the GST treatment of the fees charged by travel agencies in the event the tour bookings are cancelled.
In the past, the IRAS has maintained the view that such cancellation fees are subject to GST. Based on the updated guidance, cancellation fees which are imposed to deter customers from backing out of their bookings or serve to compensate the travel agencies for losses suffered as a result of the cancellation would not be subject to GST. This is on the basis that there are no goods or services provided in return to the customers. The updated guidance takes effect from 1 July 2021.
Fees which are imposed for administrative services provided to assist customers in cancelling their bookings or effecting the cancellation remain subject to GST. Hence, there is a need for tour agencies to review the purpose of the associated fees chargeable in the event of a cancellation and determine if the GST treatment of such fees needs to be amended in light of the updated guidance.
2. Impending changes to zero-rating rules for the supply of media sales
With effect from 1 January 2022, a supply of media sales (e.g. sale of advertising/media space / airtime) will be zero-rated if the contractual customer belongs to a foreign country and the direct beneficiary of the services is either from outside Singapore or is GST-registered in Singapore. This is a departure from the current rules which uses the "place of circulation" as the criteria for determining if zero-rating would apply.
The IRAS has released details of how the new rules would apply in the e-tax guide "GST: Guide for Advertising Industry (Third Edition)". The guide also covers the transitional rules for supplies of media sales and imported media sales straddling 1 January 2022. The salient points of the new rules taking effect from 1 January 2022 are as follows:
- a GST registered business who is not entitled to full input tax claim would have to account for reverse charge on the purchase of media sales from an overseas media supplier (with certain exceptions). This is regardless of where the advertisement is circulated.
- the supply of media sales will not be regarded as directly in connection with the advertising media in circulation nor the subject matter of the advertisement.
- an overseas supplier who is registered under the Overseas Vendor Registration (OVR) regime has to charge GST on the supply of digital media sales to non-GST registered customers in Singapore. This is regardless of where the advertisement is circulated.
- overseas suppliers who make supplies of digital media sales to non-GST registered customers in Singapore are liable for GST registration under the OVR regime if its global turnover and the value of digital services made to non-GST registered customers in Singapore exceed S$1 million and S$100,000 respectively in a 12 month period.
3. Imposition of GST on low value imported goods and non-digital services
With effect from 1 January 2023, the Government will impose GST on the following transactions:
- Low-value goods imported via air or post that are valued up to and including $400 (the current GST import relief threshold).
- Business-to-consumer imported non-digital services.
The Inland Revenue Authority of Singapore will release guidance on the new rules by 31 July 2021.
The GST legislation would be updated to reflect the changes mentioned in 2 and 3 above. The Ministry of Finance has circulated the draft amendment bill for public consultation. The public consultation exercise will close on 27 July 2021.
