$7.5m in GST wrongly charged by govt agencies to be refunded
At least $7.5 million in GST has been wrongly collected on fees for 18 government services, and will be refunded to the affected taxpayers, the Government said on Feb 14, apologising for the error.
The fees for the 18 regulatory services were wrongly deemed as processing fees by six agencies - the Council for Estate Agencies, Housing and Development Board, Land Transport Authority, Singapore Food Agency, Urban Redevelopment Authority, and Office of the Public Guardian, which comes under the Ministry of Social and Family Development.
As a result of the misclassification, GST was collected when people and businesses paid fees for the 18 services, such as to renew their real estate agent licenses, apply to operate a food processing company, register a lasting power of attorney, or rent out an HDB flat or bedroom, among other things.
The agencies have taken immediate steps to stop charging GST on the fees as of Feb 14, and will start contacting affected taxpayers from March, the MOF said in a statement.
The refunds will be paid along with a 5.5 per cent interest per year.
“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 Ministry of Finance Second Permanent Secretary 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.”
According to Singapore’s GST system, GST should not be charged on fees for regulatory services, which are the kind of services that require a government agency to determine if a business or person is eligible to engage in various activities, based on official rules or laws.
In this case, the fees for the services were wrongly deemed by the agencies to be processing fees.
For instance, an agency had charged GST on the application fee for a license, but had not charged GST on the license itself, even though it should not have charged GST on either the application fee or the license.
GST is charged on government services such as the use of public sports facilities or the rental fees for hawker stalls.
MOF said the agencies, as with all GST-registered entities, are required by law to keep records for up to five years, and therefore have records of the affected transactions from Jan 1, 2019.
Beyond the five-year period, agencies will make proactive refunds where records are available, said the MOF. Affected taxpayers can also approach the agencies to seek a refund, if they are not contacted by June 30.
The 18 fees in question represent less than 0.5 per cent of the total number of government fees, said MOF. Of these, HDB fees accounted for over 70 per cent of the 200,000 affected transactions each year, with the majority of the fees between $1 and $2.
GST charged on the affected transactions ranged from below $1 to about $1,500.
To prevent such errors in future, the MOF will be making changes to the GST Act to prescribe a list of regulatory fees where GST should not be charged. The legislative amendments are to be tabled in the coming months.
The mistake was first discovered in an internal review by the Ministry of Finance in November 2023, when the ministry looked at how GST was charged on government fees and charges. MOF concluded the review in Jan 2024.
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