Exemptions are given for the sales and leases of residential properties, importation and local supply of investment precious metals and most financial services.
On the recommendation of the 1986 Economic Committee, the Singapore Government decided that it needed to shift from direct to indirect taxes, to maintain its international competitiveness in attracting investments, and to sustain its economic growth to create well-paying jobs for Singaporeans.
The initial GST rate of 3% was among the lowest in the world, as the focus was not to generate substantial revenue, but to allow people to get adjusted to the tax.
The committee noted that other countries were aggressively cutting their direct tax rates to attract internationally mobile capital and labour, and recommended that the government rely more on GST for its tax revenues, while again cushioning the impact on Singaporean households through an offset package.
[5] On 15 February 2007 (Budget Day), then Second Minister for Finance Tharman Shanmugaratnam announced that the GST rate would be increased to 7% with effect from 1 July 2007.
[8] The government also argued that the Workfare Income Supplement, a wage subsidy, would provide significant support for lower-income workers on a continuing basis even after the GST offsets have been distributed.
On 19 February 2018 (Budget Day), Minister for Finance Heng Swee Keat announced that GST will be imposed on imported digital services, which took effect on 1 January 2020.
[13] In view of uncertainty due to the COVID-19 pandemic, the GST increase[14] will be deferred to after year 2022, with a S$6 billion Assurance Package proposed in 2020 to cushion the impact when the hike kicks in.
The government will also add S$640 million to the S$6 billion Assurance Package to help cushion the impact of the GST hike.
[17] On 16 February 2021 (Budget Day), Minister for Finance Heng Swee Keat announced that GST will be imposed on imported low-value goods brought in via air and sea transport, which took effect on 1 January 2023, ensuring that local and overseas providers are treated fairly.
[a] As with all other countries that has GST/VAT in place, critics consider the idea to be a regressive tax, meaning the poor pay more, as a percentage of their income, than the rich.
[23] Some critics contend that basic essentials such as food and healthcare should be made exempt from GST, to help lower-income households.
In addition, the experience of other countries have shown that exempting or reducing GST on certain items did not mean that tax savings would be passed on to consumers.
[24] In response to the rising cost of living, politicians from opposition parties have called for the GST rate to be reduced.