Implementation of the Goods and Services Tax (GST) in the Singapore Construction Industry
Low Sui Pheng and Carol P.W. Loi
Introduction The Goods and Services Tax (GST), to be pegged at 3 per cent across the board for the first five years, was introduced by the Singapore Government on 1 April 1994. While this may just be another tax for many businesses, the rules and regulations governing the mechanism of this tax are entirely different from what companies and individuals have so far experienced from corporate and personal income tax respectively. Because GST is a transaction-based tax, it is levied at every stage of the business process and will finally be borne by the end consumers. Businesses registered for GST purposes become in essence the taxcollecting agents for the Inland Revenue Authority of Singapore (IRAS). The manner in which businesses have traditionally been conducted will need to be changed. There will also be changes to both external and internal documentation to be maintained by GST-registered businesses. Like Value Added Tax (VAT), GST is a tax on domestic consumption. It is paid when money is spent on goods or services, including imports. It is not paid when money is saved and invested in productive capability. A business will therefore charge GST on the output it sells (called the “output tax”), pays a tax on materials and services it buys (called the “input tax”), and hands over to the tax authority the difference between its output tax and input tax in each accounting period. Conceptually, GST is in effect costless to a business if it deals in or purchases exempt goods and services or does not register[1,2]. In the case of the construction industry, the building contractor will collect the output GST on behalf of IRAS from the building client, while he has to pay input tax to the ready-mixed concrete supplier for every delivery of ready-mixed