Exempting or introducing reduced GST rates for basic necessities will benefit the rich more, who pay the bulk of GST. This is because on the whole, the rich consume more, including basic necessities.
The experience of many countries and relevant studies also show that a multi-rate GST system distorts consumption and production, and raises businesses' compliance and administrative costs significantly, which are then passed on to consumers.
In Singapore, we do not just have GST, but also GST Voucher to provide continuing support to help Singaporeans cover some of their GST expenses. We provide benefits directly to the lower-income through the GST Voucher, rather than exclude items from GST which will benefit all consumers including the richer ones. Through the GST Voucher, the net GST (GST less value of offsets) is lowered, especially for the lower-income households. This allows us to target help in defraying GST expenses to the lower- and middle-income households.
It is fairer and more equitable to have a flat GST rate on all goods and services, while redistributing the revenues in the form of the permanent GST Voucher scheme to reach out to those who need them the most. Along with other social assistance schemes, this ensures that our overall system of taxes and transfers is a fair and progressive one.