Is GST Hike & Rising Cost of Living Too Unbearable?

Many consumers made it a point to squeeze in some last-minute shopping in December as they battled the deadline of the impending 9% goods and service tax amid other rising costs. Especially for big-ticket items where the gravity of GST could be felt.

First announced during the Budget speech in 2022, Finance Minister Lawrence Wong laid out a plan to raise the goods and services tax (GST) from 7 per cent to 9 per cent. It was staggered out in two steps, going from 7 to 8 per cent on 1 January 2023, and from 8 to 9 per cent on 1 January 2024.

The rationale behind the hike in GST was to tackle the rising cost of healthcare especially in Singapore with an ageing population. Other reasons for the increase in GST are also attributed to keeping pre-school education affordable and viable to Singaporeans, and for security as we are facing a wider range of threats both physically and digitally.

Hence, the Singapore government feels that we are due an increase in GST. It was supposed to happen earlier but was put off due to the impending pandemic.

How does this translate to you as a consumer? In terms of homeownership, let’s take a look at the increase in the monthly expenditures of HDB flats.

In addition to the increased GST, other hikes that affect homeowners directly will be electricity tariffs, gas tariffs, water prices, and carbon tax. SP Group, which supplies 60 per cent of all households in Singapore, will increase electricity tariffs by 5 per cent, going from 31 cents per kilowatt-hour (kWh) to 32.58 cents. Gas tariffs will be going up by 4 per cent, from 24.21 cents per kWh to 25.23 cents. Water prices will also increase by 20 cents per cubic m this coming April. Lastly, in a bid to transition into a low-carbon economy, carbon tax will take a drastic hike from $5 to $25 per tonne of emissions this year.

GST does not only extend to goods and services within the country, first announced during Budget 2021, with effect from 1 January 2023, we are required to pay GST for low-value goods (LVG). LVGs are essentially referring to the items we purchase on our online shopping sprees from companies that are GST-registered suppliers. This would encompass any items valued at $400 and below through online means.

A study conducted by researchers from Nanyang Technological University (NTU) and the Lee Kuan Yew School of Public Policy in the latest edition of the Minimum Income Standard (MIS) 2023 report found that an average household of four would require a minimum of $6,693 monthly to afford a basic standard of living in Singapore. Another finding they had was that if you were to compare the actual income per household member, about 30 per cent of working households cannot meet basic needs. It showed a 4 to 5 per cent increase in household budget between 2020 to 2022:

Rising cost of living has been a growing concern in recent years, and even without looking at hard facts and statistics, we can already feel the effects. Everything just seems to go up in price since the pandemic, our favourite food, clothes, groceries, and the list goes on.

Amidst the hike in GST, inflation is at an all-time high. The Consumer Price Index (CPI) is the measurement of the average price change over time of a fixed basket of consumption goods and services that are commonly purchased by resident households. It essentially acts as the measurement of consumer inflation.

The CPI has risen dramatically over the last 20 years, in the five years leading up to the pandemic we can see stability, and then an acute spike from 2020 onwards. Inflation went up by 2.3% from 2020 – 2021, and it expanded to 6.1% from 2021 to 2022. Hence, over the period of 2020 – 2022 inflation went up by a total of 8.6% (data from Singapore Department of Statistics). That is probably why you can feel its effects and realise your monthly expenses growing.

With housing prices on the rise and housing also being the largest expenditure group in Singapore’s CPI, it’s no wonder why more people are stepping up and becoming interested in understanding the real estate market and its trends. From purchasing to financing your home, till the point of sale in the future, every step should be calculated and tailored. Watch our video below to see how Singaporeans feel about our GST hitting 9 per cent!