The Curious Case of the 0.1 per cent Service Charge

The Business Times, 26 November 2022

3 Pages Posted: 30 Mar 2023

See all articles by Vincent Ooi

Vincent Ooi

Singapore Management University - Yong Pung How School of Law; Singapore Management University - Centre for AI & Data Governance

Date Written: November 25, 2022

Abstract

Just before 1 August 2022, a coffeeshop zi char chain announced that it would impose a 0.1% service charge. This decision was reversed within two weeks due to "customers' reactions".

While the rate might appear to be absurdly low and not worth the trouble of imposing, this article suggests that there was more to the situation than first meets the eye. GST regulations require merchants to list GST inclusive prices unless the goods and services are provided by hotels and F&B outlets that are subject to a service charge. The 0.1% rate is thus explicable as a likely attempt to get around the rules and list GST exclusive prices instead.

The IRAS apparently got wind of this, for they updated their guidance within a few weeks to state that the exception would not apply to those who "levy a nominal service charge without genuine business reasons other than to avoid displaying GST-inclusive prices."

Keywords: Tax Law, Taxation, Goods and Services Tax, Singapore Tax, GST

Suggested Citation

Ooi, Vincent, The Curious Case of the 0.1 per cent Service Charge (November 25, 2022). The Business Times, 26 November 2022, Available at SSRN: https://ssrn.com/abstract=4395757

Vincent Ooi (Contact Author)

Singapore Management University - Yong Pung How School of Law ( email )

55 Armenian Street
Singapore, 179943
Singapore

HOME PAGE: http://vincentooi.com

Singapore Management University - Centre for AI & Data Governance ( email )

55 Armenian Street
Singapore
Singapore

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