Singapore wrongly charged taxpayers US$5.5 million in GST last 5 years, will have to refund fees

This translates to some 200,000 transactions annually that were wrongly charged with GST since January 1, 2019, said MOF in a statement on Wednesday.

Around 90 per cent of these transactions were with individuals, the rest with businesses, and HDB fees account for more than 70 per cent of the transactions.

“MOF and the six agencies apologise for the erroneous charging of GST. All agencies have taken immediate steps to cease the charging of GST on the affected fees from today,” said MOF’s second permanent secretary for finance Lai Wei Lin.

“The Government will refund affected taxpayers the GST charged for the fees, and we will make the refund process as seamless as possible.”

The erroneous charges would have been applied even before the past five years.

But MOF said GST-registered entities are required by law to keep records for up to five years.

Hence, the affected agencies will have a record of the taxpayers who had made transactions in the last five years, but beyond that, they will make proactive refunds where records are available.

All six agencies will also stop charging GST on the 18 fees from Wednesday, the ministry added.

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MOF noted that there are GST-registered businesses that may have been wrongly charged GST on certain fees, but they would also have claimed the GST they paid out as input tax during their business, so are not affected.

But individuals and non-GST-registered entities cannot claim input tax.

The amount of wrongly charged GST for this group is estimated to be about S$1.5 million a year, MOF said, with the vast majority of the transactions involving GST of S$5 or less per transaction.

MOF said that the errors were discovered last November when it found inconsistencies in the application of GST on certain government fees during an internal review of the GST treatment on such fees and charges.

It concluded the review last month.

In general, GST would be charged on services rendered by government agencies, for example, fees for the use of public sports facilities or rental fees for hawker stalls and exhibition spaces.

But GST should not be charged on services that are regulatory in nature, the ministry said.

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The affected fees include, for example, administrative charges for homeowners who rented out their HDB flats and bedrooms and application fees for major modifications of vehicles such as engine and transmission changes.

The 18 fees were initially deemed by agencies to be processing fees, but on review were found to be regulatory in nature.

For example, the review found that an agency had charged GST on the application fee for a licence but not on the licence itself.

The correct process should have been not to charge GST on either the application fee or the licence fee, MOF said.

From March, the six agencies will reach out to affected taxpayers and refund, with interest of 5.5 per cent a year, the GST that had been paid, based on available records.

If affected taxpayers are not contacted by June 30, they can reach out to the agencies to seek a refund.

The current approach is for government agencies to assess and decide whether to impose GST on their fees based on broad principles and guidelines set out by MOF.

There are more than 5,000 government fees and charges, and this approach can result in mistakes by agencies – be it to wrongly charge GST, or even to miss out on applying GST, MOF said.

To minimise the risk of such errors in the future, MOF will make legislative amendments to the GST Act to clarify the treatment of GST for such fees, and to prescribe a list of regulatory fees where GST should not be charged.

On Wednesday, four of the six affected agencies also issued separate statements on how they plan to refund the erroneous charges.

HDB said it will from mid-March reach out to affected households who were wrongly charged GST on two administrative fees in the last five years to arrange refunds.

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• It had charged GST of about S$1 on administrative fees for applications to rent out a flat or spare bedrooms

• It had also charged GST of about S$15 on administrative fees for the compulsory acquisition of flats

• Affected households will receive a notification from HDB via their Singpass app and a letter from HDB in the mail

• They will be asked to provide some details on HDB InfoWEB to facilitate the GST refund

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LTA said it will refund the GST wrongly charged for nine fees made within the last five years:

• They include application fees for major modifications of vehicles, such as engine and transmission changes (manual to automatic or vice versa)

• Others include the application fee for an existing private hire car driver’s vocational licence holder converting to a taxi driver vocational licence

• The erroneous charges amount to S$12,000 a year

• The refunds will be made between March 1 and June 30 this year

• They range from 70 cents to S$42.70 per transaction

• LTA will credit the refunds to eligible recipients with bank accounts registered with LTA or valid PayNow accounts

• LTA will then notify the recipients through e-notification and SMS or letters

• For recipients for whom LTA does not have bank account information or where the information is not updated, LTA will notify them to update their details via the OneMotoring website or to register their PayNow account at their bank and inform LTA

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The OPG said it had wrongly charged GST on two application fees:

• To register a Lasting Power of Attorney (LPA) and to register as a professional deputy.

• About 10,000 donors who registered an LPA and 50 professional deputies who paid application fees in the past five years are affected

• The GST charged ranges from S$3.27 to S$24.77

• The OPG will reach out to affected individuals via letters from March and refunds will be made via PayNow to their bank accounts or bank transfers

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The Urban Redevelopment Authority (URA), meanwhile, said it will refund GST paid on processing fees for development applications and lodgements.

• Since January 2019, about 37,700 applicants, namely businesses and landed property owners, have submitted development applications and lodgements to URA

• URA expects the number of actual refunds to be much lower as a “significant proportion” of these applicants could be GST-registered entities which had claimed input tax and are not eligible for the refund

• The GST refund amounts range from S$35 for change of use of premises to S$210 to S$560 for individual landed housing developments

• For larger developments, where GST amounts can vary greatly depending on the scale of the development, the majority are estimated to fall within the range of S$10.50 to S$1,500. Applicants in this group are mostly businesses, URA said.

• From March 1, URA will be contacting eligible applicants to request for information to facilitate the refunds