Indirect Tax

Update on GST treatment for supply of media sales

Jeremy O’Neill
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The Inland Revenue Authority of Singapore (IRAS) has underlined how the GST treatment of media sales will change with effect from 1 January 2022.

Background and about the e-Tax guide

The Inland Revenue Authority of Singapore (IRAS) has underlined how the GST treatment of media sales will change with effect from 1 January 2022. The newly published revised e-Tax guide on 11 June 2021, 'GST: Guide for Advertising Industry (Third Edition)' (“the revised e-tax guide"), follows the Singapore Budget 2021 announcement by then Finance Minister Heng Swee Keat.

Like most digital sectors, online advertising has grown and is expected to account for an increasing share of advertising spending. The current rules require taxpayers to track where the media content is substantially circulated to determine whether it qualifies for zero-rating (i.e. is >51% of the media content circulated within or outside Singapore).

Developments in technology have revamped how media sales are supplied and consumed by suppliers and consumers alike. These developments have made it increasingly challenging for taxpayers to determine whether their supplies qualify for zero-rating or not under the current rules.

Considering this, and with GST applying to imported services from 2020, the IRAS decided to review the suitability of the current zero-rating provision on media sales and change the rules to be in line with the the general zero-rating provision with effect from 1 January 2022.

This change is expected to make it easier for taxpayers to determine the appropriate GST treatment and improve tax compliance.


Key highlights of the changes

The draft legislation stipulates that the updated rules will be based on the concept of where the contractual customer and beneficiary of the service is based. This is in accordance with the general zero-rating provision for services (section 21(3)(j) of the GST Act).

If the contractual customer of the service belongs outside Singapore and the direct beneficiary of the service:

  • belongs outside Singapore; or
  • is a GST-registered person in Singapore,

the media sales will be zero-rated.

If the contractual customer belongs in Singapore, the media sales will be standard-rated.

The general zero-rating provision under section 21(3)(j) often raises questions on who the direct beneficiary of the services is, and this is certainly true for the advertising industry. In the revised e-tax guide, the IRAS has answered many of these questions and clarified its interpretation.

Specifically, the IRAS has provided clarity that the viewers of the advertisement (being the ones “consuming” the content) are not direct beneficiaries of the supply of media space as they merely obtain “spin-off” benefits such as gaining product knowledge from the advertisements.


Our view

It is good to see that that the IRAS has continued to work closely with industry players to design rules that account for the way the industry operates and conducts business. They have also articulated scenarios more clearly in the tables and flowcharts (shown in the Annexes of the revised e-tax guide). 

Notwithstanding that the IRAS has detailed the GST treatment for many of the common scenarios, businesses should be careful not be apply these too liberally to its business circumstances as the e-tax guide is only intended to provide a framework and insight into the IRAS’s interpretation of the relevant provisions.

In the e-tax guide, the IRAS has included a table and flowchart covering the pre- and post-GST treatment for each change (e.g. change to the general zero-rating provisions with effect from 1 January 2020 and this upcoming change effective 1 January 2022). Considering this, businesses need to be careful to ensure they are looking at the correct section when determining the GST treatment.

Businesses in the advertising industry need to act now to review their current tax determination process and/or tax logic, as well as consider whether any of their existing contracts will be caught by the detailed transitional provisions (implemented as an anti-avoidance measure) and consider the resulting implications.

Partially exempt businesses that procure media sales from overseas suppliers should also read the revised e-tax guide as they are also likely to be affected by the changes by virtue of the services being caught by the reverse charge mechanism.