While Singapore has substantial reserves that it draws on to help fund the budget, Heng said the government must act prudently as the economy matures and the population ages.
"This GST increase is necessary because even after exploring various options to manage our future expenditures through prudent spending, saving and borrowing for infrastructure, there is still a gap", he said.
Singapore said on Monday it would impose a carbon tax from next year to cut its greenhouse gas emissions and make companies more competitive as global agreements on climate change take effect.
During the Budget speech in Parliament, Singapore Finance Minister Heng Swee Keat described the bonus as a "hongbao" which in Mandarin means a monetary gift given on special occasions, saying that this "reflects the government's long-standing commitment to share of the fruits of Singapore's development with Singaporeans", reported Channel News Asia.
"Today, [business to business (B2B)] services such as consultancy and marketing purchased from overseas suppliers are not subject to GST", the minister said. An amount of S$2 billion will be set for an insurance scheme, Eldershield, to help senior citizens with severe disabilities to help them cope financial demands in their daily life. The Government, however, has made a decision to implement a credits-based carbon tax uniformly across sectors with no exemptions.
B2B imported services will be taxed via a reverse charge mechanism, which will require the local GST-registered business to account for GST on the services that it imports.
There were also goodies such as higher grants for Singaporeans, including singles, buying resale flats to live with or near their parents.
Citizens with an annual income of S$28,000 or below will be eligible to receive S$300 (Rs14,000).
It's estimated that 30-40 companies will be impacted by the tax, which contribute up to 80 percent of Singapore's carbon emissions, according to The Straits Times.
The tax will initially be levied at $5 Singapore dollars ($3.8 US) on all facilities which produce 25,000 tonnes, or more, of greenhouse gas emissions each year. Those earning more than US S$100,000 a year will get S$100.
The wage credit extension will cost the Government an additional $1.8 billion over the next three years.
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