SINGAPORE will prescribe a list of government fees that will not be subject to the goods and services tax (GST), with an initial list to be published at the end of April, said Second Minister for Finance Chee Hong Tat on Tuesday (Apr 2).

Following this, fees that are not prescribed in the list will be subject to GST, including those which are not currently being taxed, but should be charged GST under the government’s clarified approach, he said.

To minimise the impact of the change, the government will absorb the GST to be charged until end-2025. “Hence, all affected fees will not increase immediately as a result of the amendments.”

The Goods and Services Tax (Amendment) Bill passed in Parliament on Tuesday seeks to address the issue of government agencies wrongfully charging GST on 18 regulatory services.

The blunder, made public in February, emerged during an internal review of regulatory and ancillary fees that charge GST. The six affected agencies said they will refund the GST mistakenly charged, which amounts to at least S$7.5 million over a five-year period.

Such regulatory fees should not be subject to GST as they are imposed for the purposes of control and regulation, said Chee. In contrast, fees for provision of services, such as the rental of public sports facilities, are subject to GST.

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“This approach ensures parity in tax treatment, where services that can potentially be provided by, or outsourced to, the private or non-government sector, are subject to GST.”

So far, the government has left it to the individual agencies to self-assess and determine what constitutes a regulatory fee, based on guidance provided through circulars. But agencies have not always been clear about where to draw the line, Chee noted.

“This is not ideal, and can give rise to wrongful charging of GST, as was the case for the 18 fees.”

Therefore, following the legislative changes, the Ministry of Finance (MOF) and the Inland Revenue Authority of Singapore will work closely with agencies to assess their fees, instead of allowing them to make the assessment themselves.

Review underway

Under the move, MOF will work with agencies to review the remaining 1,700 regulatory and ancillary fees that currently do not attract GST, and progressively prescribe their regulatory fees in the non-taxable list. The work is slated to be done by September.

Chee listed three categories of fees which will be subject to GST: The first category comprises fees for services provided by the government, which are clearly subject to GST and are already currently taxed.

The majority of fees fall into this category, and there will be no change in the treatment of them, he said.

The second category is for fees that are currently charged GST, but there has been inconsistency in the interpretation of law by the government agencies.

For instance, some agencies may impose GST on fees for examinations that individuals must undertake to become licensed professionals in a regulated industry; other agencies do not assess these fees as taxable.

Based on the government’s policy intent, these fees should attract GST; only the eventual licence fee should not be taxed.

“The charging of GST on these fees is in line with our clarified policy intent, but is susceptible to legal challenge under the current GST Act,” said the minister.

The government will thus validate the past GST collections for the agencies which have been charging GST on such fees, to ensure consistency between the legal position and the clarified policy intent, he added.

The third category groups together fees which are not charged with GST now, but should be taxed, based on the clarified policy intent.

These include examination fees, which some agencies are currently not taxing, and inspector fees prior to the licensing and conduct of certain business operations. “We estimate that there are more than 100 such examination and inspection-related fees.”

These are the fees for which the government will absorb the GST in the first instance. A freeze will be imposed until the end of 2025.

MOF also asked the agencies involved to review their fees and charges, and to consider ways to streamline processes, or to reduce or remove these fees instead.

“If there are unavoidable cost increases, then agencies would have to raise their fees,” said Chee. “But they will do so only after end-2025, and will ensure that any increases are phased in gradually, taking into consideration the impact on affected stakeholders.”