Why is GST applied to the water conservation tax?

The GST and the WCT serve different purposes.

Why is GST applied to the water conservation tax?

The water conservation tax (WCT) and the GST serve different purposes.

The WCT is levied on all water consumers, to reflect the fact that water is precious, and to encourage every individual and company to play a role in conserving our water resources. When the WCT is added to the water tariff, consumers are paying the long-run marginal cost of water: what it cost to produce the next drop of water from our desalination and Newater plants.

The GST is a tax levied on the consumption of goods and services. It is calculated based on the final price of goods or services, inclusive of any other taxes and duties. The WCT is part of the final price of water that the GST is levied on. This is similar to practices in other countries such as the United Kingdom and New Zealand.

What is important is that the Government keeps our system of taxes fair, by helping the lower- and middle-income households through subsidies and grants.

For example, the permanent GST Voucher scheme has a U-Save component which provides rebates to more than 880,000 HDB households each year to offset their utility bills, with more rebates for those living in smaller HDB flats.

This article is accurate as of Feb 2017. For latest updates, head over to www.mof.gov.sg.

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