Charging GST on e-Commerce Transactions and Overseas Vendor Registration (OVR) Regime
Updated: Nov 4, 2021
GST charge on electronic commerce transactions of physical goods, and services supplied over the internet including digital services
Generally, the medium through which the transaction occurs does not alter the taxability of the transaction. Hence, the same GST rules apply for supplies of goods and services made in Singapore regardless of whether they are made via the internet or an electronic network (including electronic marketplaces) or through traditional means.
Services / Digital Services Supplied Over the Internet
Supply can be zero-rated and charged 0% GST only if services qualify as international services under Section 21(3) of the GST Act. This also applies to supplies of digital services.
Digital services are services which are supplied over the internet or an electronic network and the nature of which renders their supply essentially automated with minimal or no human intervention and impossible without the use of information technology.
Digital services include the supplies of the following:
a. Downloadable digital content (e.g. downloading of mobile applications, e-books and movies);
b. Subscription-based media (e.g. news, magazines, streaming of TV sows and music, and online gaming);
c. Software programs (e.g. downloading of software, drivers, website filters and firewalls);
d. Electronic data management (e.g. website hosting, online data warehousing, file-sharing and cloud storage services); and
e. Support services, performed via electronic means, to arrange or facilitate a transaction, which may not be digital in nature (e.g. commission, listing fees and service charges by electronic marketplaces).
Zero-Rating Services / Digital Services
Zero-rating will apply for services if they meet both conditions (a) and (b) below:
- The services are supplied under a contract with and directly benefit a person who belongs in a country outside Singapore (i.e. an overseas person), who is outside Singapore at the time the services are performed; or
- The services are supplied under a contract with an overseas person and directly benefit a GST-registered person in Singapore.
- The services are not supplied directly in connection with land or goods in Singapore.
Overseas Vendor Registration (OVR) Regime
An overseas supplier making supplies of digital services to customers in Singapore may be required to register for GST and charge GST on its supplies.
An electronic marketplace operator (whether local or overseas) supplying supplies of digital services on behalf of overseas suppliers to customers in Singapore may also be regarded as the supplier of the digital services and be required to register for GST and charge GST on the supplies.
An electronic marketplace operator (whether local or overseas) may elect to charge and account GST on all supplies of digital services made by local suppliers through its marketplace, in addition to those made by overseas suppliers.
A local electronic marketplace operator may elect to charge and account GST on supplies of digital services made by overseas suppliers through the marketplace.
Where an electronic marketplace operator has made any of the elections, a local supplier supplying digital services over the platform would be treated as making the supply to the electronic marketplace operator instead of the end-customer. The electronic marketplace operator is in turn treated as making another supply of digital services to the end-customer.
To make the elections to charge GST, the electronic marketplace operator has to seek approval from the Comptroller of GST in writing and agree with his suppliers that it will be accounting for GST on the digital services made through the marketplace.
Belonging Status of Customers
Amongst other conditions, the “belonging status” of customer is relevant in determining if digital services can be zero-rated under the GST Act, e.g., Section 21(3)(j).
If an overseas vendor registered under the OVR regime or an electronic marketplace operator supplies digital services on behalf of suppliers, he is required to determine the belonging status of his customer based on a specified set of proxies.
Generally, if customer has a Singapore address in the database, a Singapore domain name (e.g. firstname.lastname@example.org) or a Singapore IP address, the customer should be treated as belonging in Singapore. In the absence of such information, a declaration from the customer on his location / usual place of residence should be obtained.
Common e-Commerce Items
Common e-commerce items include sale of computer software and maintenance services, sale of virtual items in online games, advertising services over the internet, web-hosting services, and server co-location services.
If you would like to know more, please contact Bestar.