Singaporeans will receive financial support as the GST increases, especially lower-income households.
Finance Minister Lawrence Wong announced that the planned Goods and Services Tax (GST) increase will be delayed to 2023 and implemented in two phases: the first rise from 7% to 8% in January 2023 and the second to 9% in January 2024. The decision follows Prime Minister Lee Hsien Loong’s statement that the economy is recovering from COVID-19, making it necessary to move forward with the GST hike. Originally proposed in 2018, the increase is essential for supporting Singapore’s growing healthcare costs and the aging population.
Wong emphasized the importance of considering the broader situation, including the economic recovery, inflation, and the ongoing pandemic. He acknowledged the concerns Singaporeans have about rising prices coinciding with the GST hike, stating, “Our revenue needs are pressing. But I also understand the concerns that Singaporeans have about the GST increase taking place at the same time as rising prices.”
To cushion the impact, the government will maintain GST absorption for publicly subsidized healthcare and education. Additional funds, such as S$15 million annually for Town Councils, will cover the extra GST on service and conservancy charges. There will be no rise in government fees for public services in 2023, including school fees, public car park charges, and other government agency fees.
A Committee Against Profiteering will be formed to prevent businesses from unfairly raising prices due to the GST increase, chaired by Minister of State for Trade and Industry Low Yen Ling. To further ease the burden, the government will allocate an additional S$640 million to the S$6 billion Assurance Package announced in 2020. The package, combined with improvements to the GST Voucher (GSTV) scheme, will help offset at least five years of increased GST expenses for most households, and about ten years for lower-income households.
The enhanced Assurance Package will provide cash payouts of between S$700 and S$1,600 for adult Singaporeans. Eligible seniors will receive a special GSTV – Cash (Seniors’ Bonus) of S$600 to S$900. Additional rebates will be provided for Housing Board households, depending on flat types, and all Singaporean children and seniors will receive MediSave top-ups of S$450.
Singaporean households will also receive two sets of CDC vouchers, each worth S$200, in 2023 and 2024, usable at participating merchants, hawkers, and major supermarkets. Wong acknowledged that even with these measures, vulnerable households may need extra support, and those with urgent needs can seek assistance through their Citizens’ Consultative Committees (CCC). The government will contribute S$5 million to the CCC ComCare Fund and provide self-help groups with S$12 million over four years.
In addition, S$40 million will be set aside for businesses to apply for subsidized accounting and point-of-sale solutions under the Productivity Solutions Grant. Enhancements to the permanent GSTV scheme will also be introduced, adding a permanent service and conservancy charges rebate and raising the income threshold for GSTV – Cash from S$28,000 to S$34,000 to cover more Singaporeans. Payouts will increase to S$500 for homes with annual values under S$13,000, and S$250 for homes valued between S$13,000 and S$21,000.
Wong highlighted that the improved GSTV scheme will continue to provide support for lower- to middle-income and retiree households, even beyond the Assurance Package period. The GSTV will fully offset the GST expenses of retiree households in smaller flats and significantly reduce costs for those in larger flats. Additionally, the GSTV will cover approximately half of the annual GST expenses for low-income households without elderly members.
Wong reassured that low-income households will receive substantial ongoing support, ensuring that the GST hike does not negatively impact them. “This is why the GST increase will not hurt low-income households. For them, the impact of the increase in GST will be neutralized,” he said.
